The idiocy of Australian gas policies continues to add to those followed in electricity. Labor and the Coalition, having been spooked by Green-Alan Jones campaigns, have prevented new exploration in eastern states, bringing predictable and inevitable outcomes.
Prices at the Wallumbilla hub have risen from their former levels of $3 per gigajoule to $10 at present and in the peak summer periods were $16 plus; this was before the Hazelwood closure and there are reports of forward contracts at $20 per gigajoule. Prices in the US remain at about $A4 per gigajoule and the prospectivity of Australia for gas is, according to the US Energy Information Agency, similar to that of the US.
In the light of state based restrictions on new development and federal and state policies forcing closure of low cost coal electricity generators governments are confronting the likelihood of extreme prices both for gas itself and for gas fed into electricity generation.
The Commonwealth has been jawboning and threatening gas firms to divert product from their contracted overseas markets back into Australia. The threat is that a national gas reservation policy will be imposed unless the suppliers “see reason” and reduce their profits by supplying a domestic market where supply has been made scarce by government policies. Of course, the short term palliative of a gas reservation policy only means longer term costs and an increased risk profile, but these factors weigh lightly with politicians reflecting on their own survival in the face of the damage their policies have created.
Tomorrow there is yet another meeting between government and the firms to prevent the political fallout of the high prices policies have created. There is even the suggestion that gas producers be allowed to swap deliveries of overseas purchases of gas for domestic supplies, as though that is some sort of novel solution not routinely entered into in the petroleum world.
It is hard to engineer a situation where the nation with among the world’s most abundant supplies of energy has achieved energy prices that are among the world’s highest and where reliability of supply approaches third world levels. The cause is government policy making, interference and the successively more senior levels of political control being imposed.
The solution is to remove the causes of the problem starting with the renewable energy policies that have created an electricity shortage and a doubling of price; and the gas exploration and development policies that have added to this in NSW, Victoria and South Australia.
Hopefully we will not have to wait until the next government but one to see such obvious policies enacted.