Mwahaha! Let the gas cartel burn.
Of all of the stupid hills to die on, this is the one that the Australian Financial Review has chosen. To fight an act of legislation that finally burns the gas cartel and, in so doing, saves every other business and consumer east of WA scores of billions of dollars.
All Australian businesses should take moment to consider what kind of editorial vision has poisoned that paper to make a stand for three firms that are monopoly-rorting every one of them east of WA.
And then move on to what really matters. The gas cartel is burning and we should ALL be dancing around the bonfire. Here is the legislation:
A mandatory code of conduct is proposed, to address systemic issues within the wholesale gas market and guide participants’ behaviour. As part of the code, a reasonable pricing framework will provide a basis for producers and buyers to negotiate domestic wholesale gas contracts at ‘reasonable prices’, which should reflect the cost of domestic gas production including a reasonable return.
A temporary, emergency price cap is also proposed to ensure domestic industry remains viable, and ensure households and businesses have access to affordable energy.
The result in the energy markets is marvelous as electricity futures crash:
I expect the entire east coast to drop well below $100MWh in due course, reversing the full Ukraine War shock.
The added bonus is the AFR and its cartel daddy want to fight. Bring it on!
In a rare public comment, the head in Australia of Japanese giant Mitsui, Masato Sugahara, added to criticism by ExxonMobil, Chevron and Shell, saying the intervention “may not align with international market standards for investor certainty, and could be counter-productive for domestic consumers in the long run.”
…Beach Energy CEO Morne Engelbrecht, Shell Australia chairman Tony Nunan and US energy giant Chevron voiced their concerns, joining criticism over the weekend from major east coast gas suppliers, including ExxonMobil, Woodside, Origin and Cooper Energy.
“These measures will artificially increase demand for gas while delaying higher cost projects and lead to higher long-term gas prices, putting at risk Australia’s energy security,” he said. “This at a time when new gas supply is hard to come by.”
…one senior gas industry executive called the extent of intervention proposed “diabolical”, and said it represented an existential threat to the sector.
…“Who cares about the $12/GJ price cap for 2023 – that’s just a sideshow – what they are really doing is putting in place a permanent price cap where the government will decide what is the appropriate rate of return for a company.
That’s right. You formed a cartel that ended the “market” years ago. The best way to regulate such is a “cost plus” model.
Moreover, we have no energy security now. That’s what this is all about.
More:
Another gas industry CEO said the company and its shareholders were “absolutely furious” and said gas industry investors would be “sitting on their hands” for the next 12 months to see what eventuates rather than bringing on needed new supply.
”It is assuming that gas developments are infrastructure and some sort of zero-risk proposition where you get guaranteed returns,” the executive said. “It treats us like a power line: it’s a fundamental misunderstanding of how the resources sector works.”
No, it doesn’t. It understands it perfectly. You’re a cartel rorting every Australian east of WA. Instead, you will now only be able to charge “‘reasonable prices’, which should reflect the cost of domestic gas production including a reasonable return”.
What is so unreasonable about “reasonable prices”? You still get your return, just not at the monopoly gouge prices that will drive up inflation by 6%, halve house prices, destroy real incomes, and deliver a depression to the wider economy.
I mean, seriously, who is being unreasonable?
More:
Potentially at stake are planned investments in domestic gas supply on the east coast, which include Santos’s Narrabri coal seam gas venture in NSW and a $1 billion coal seam gas expansion in Queensland planned by Senex Energy, owned by South Korea’s Posco and Gina Rinehart.
They all make great money at $12Gj and a “reasonable” return under the Code. If the carteliers want to sit on their hands then apply “use it or lose it” laws and let others buy them to develop. More competition is what this is all about. If need be, form a public gas company, acquire the assets and the taxpayer can make an even better return with its cheap cost of capital, as well as benchmark prices even lower!
Meanwhile, the cartel’s kernel of evil is doing what cartels do:
Global energy supermajor Shell has suspended its role in a landmark gas supply deal designed to prevent shortfalls on the east coast next year as it assesses the impact of the Albanese government’s plan to cap fossil fuel prices.
Queensland’s three LNG exporters – Shell’s QCLNG joint venture, Origin Energy-backed APLNG and Santos’ GLNG – are set to hold talks this week to determine whether their September agreement to supply 157 petajoules of gas – about 25 per cent of annual east coast demand – can go ahead after the government announced a series of interventions in the energy market.
Riiiight. No collusion to fix prices there…
If the gas cartel doesn’t want to play ball then the answer is simple. Let it be known that if this dummy spit continues then the Government will move to DEFCON3 and pursue full-blown super profits taxes to seize the fantastically unreasonable profits currently being made in gas exports.
This is scores of billions of dollars in pure profit. So large an amount, in fact, that it cratered the Australian current account in the last quarter as massive dividends left our shores bound for cartel head offices worldwide.
The cartel has no right to this war-profiteering windfall. It never invested in it. It belongs to the Australian owners of the assets and would look very nice in the budget.
Let’s see what happens to these wanker executives’ jobs when they lose that little lot for shareholders.
Even the cartel’s woman on the inside can see the writing on the wall:
Resources Minister Madeleine King is urging the gas industry to negotiate with the government over its intervention plans and accused some key exporters of thumbing their noses at the heads of agreement she signed in September by continuing to demand “exorbitant” prices.
Burn the gas cartel to the ground!
