Old fashioned protectionism seeks hand outs to combat low-cost overseas competition. Aside from the motor industry it has been largely usurped by new regulatory forces, like those calling for wind and solar subsidies and others leveraging off environmentalism.
Then up comes a naked lobbying attempt to force domestic supplies of gas to be sold to a value-adding business.
Incitec Pivot wants to turn coal seam gas, which we have in great abundance, into fertilisers. But it is seeking to deprive gas producers of revenue by forcing them to set aside a proportion of the gas they extract for domestic users. Incitec Pivot CEO, James Fazzino writing in the Australian today says,
We are in a fight for survival and our “coach”, the Australian government, has conceded to our opponents one of our key competitive national advantages: energy.
Talking like some socialist senator who believes that all that is discovered and produced in the country rightfully belongs to the government, he says,
We have allowed major oil and gas companies to control the use of the gas so that export contracts to Japan and China get priority.
Domestic sales of gas, where they avoid the costs of ocean transport and of liquefaction, would be expected to sell at a discount from that which is exported. But Mr Fazzino is looking for assistance in the form of a reservation policy which he thinks might lead to gas being sold to domestic users at one-quarter the export price. The simple arithmetic is if producers are forced to sell 15 per cent of gas (the number Mr Fazzino mentions) at a discount of 75 per cent the overall revenue is reduced by around 10 per cent. And a 10 per cent revenue reduction translates into a much greater proportion of profit – the residual after all other costs are met.
Already producers are loaded with massive costs to combat confected environmental issues and are facing a propaganda war from Alan Jones who imagines that gas production will kill off farming.
A 10 per cent hit to revenue would more than halve the prospective profit on most projects and markedly retard the growth of an industry with great prospects. But that is of no consequence to those who are looking to use government muscle to force producers to supply them at a fraction of the market price.