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Despite what Canberra believes, the gas crisis is not a question of supply. The problem lies with the handful of extremely powerful companies which steer the market as they see fit.
The alleged gas “crisis” in Australia is patently not about supply. It is about systematic abuse by a handful of gas oligarchs to reap giant profits and rig prices. The creation of such a “crisis” is as politically convenient for politicians as it is economically and financially advantageous for the handful of companies running this national sideshow.
With the rewards of power, profit and incumbency, like those I’ve just outlined, why would either the cartel or our political leaders desire a real, meaningful outcome? The actions of the Turnbull Government over the last few weeks, supposedly a party that champions the free market, in failing to act to curb LNG exports, is deeply troubling.
With even a layman’s understanding of financial and economic analysis, this decision is baffling. It will cause further harm to our national prosperity. Let’s not delude ourselves, the gas industry in this country is not a free market, it is a highly-regulated market, openly abused by just a handful of extremely powerful companies. It is a deliberately distorted market, distorted by design to inflate prices, and in turn profits. It is a distorted market, designed to entrench the cartel’s power.
Who will continue to suffer? Australian industry, small businesses and consumers in towns and suburbs across the country, from Glenelg to Gympie.
Let’s be crystal clear about this supposed supply issue. There simply is none.
This entire charade is a business model engineered by four energy companies – BHP, Origin Energy, Santos and Shell – to restrict supply to Australians in order to force prices up. It is untrue and lacking merit to suggest that unlocking onshore gas resources in Victoria and New South Wales would solve the repeated price gouging witnessed in those two states.
Again, to strip things back to their undeniable basics – Victoria produces more gas than it consumes – sending surplus gas to Adelaide, Tasmania and Sydney. Extracting more gas domestically is simply too high a cost in a world where there is a glut in supply and prices have crashed.
Likewise, suggestions that producing high cost gas from remote regions in the Northern Territory is plainly not a globally competitive solution. Similarly, the uneconomic Narrabri project is no solution at all to the current gas price problem. Suggesting these are realistic or financial or indeed economically sensible solutions is misleading and reckless. Investors should not be led to believe these sorts of projects have any future at all. Suggesting that public funds should be propping up these illusory projects (pure stranded assets by design) of the cartel is outrageous.
Why are Australians subsidising purely loss making gas exports while being stung on price? Why is there any hesitation to tackle any multinationals deliberately distorting a market, driving up prices, masterminding misleading debate and damaging other industry?
IEEFA believes that when it comes to energy policy, the market should operate freely. What we have seen in this unsavoury national debate is misinformation, a desire to protect and enhance the standing of the handful of companies who have wilfully sought to gouge on price and potentially cripple key elements of the Australian economy. Our national leaders and parliamentarians must be completely clear on what is going on here.
This is not a supply issue. This is a price issue. An issue of profit and power. The real debate should be centred on why are we not seeking greater transparency, greater consumer and business protection from price gouging, enhanced competition and a strong willed, bi-partisan political desire to break up this cartel.
Why are Australians subsidising purely loss making gas exports while being stung in their homes on price? Why is there any hesitation to tackle any company or gang of multinationals that are deliberately distorting a market, deliberately driving up prices, masterminding a misleading debate and damaging other industry?
Prime Minister Turnbull is further risking Australia’s economic competitiveness by not standing up to the gas cartel. The Federal Government needs to act urgently to put in place practical solutions, some modelled on the WA gas reservation policy, others focused on breaking up this undue market power. IEEFA believes that Australia urgently needs a domestic gas reservation policy to bring prices down.
As I have outlined, this whole issue is not about supply, it’s about price. Continuing to suggest this “crisis” is operating in a vacuum or that interference in the gas industry is an affront to the free market, is patently absurd.