Will the gas industry get a green light?

Josh Frydenberg, Minister for Environment and Energy
Contributed by Jim Hayes

At today’s Council of Australian Governments (COAG) meeting, attended by every energy minister in Australia, there is the possibility of a bowing to gas industry demands and sparking a run on gas development around the country to head off a supposed shortage.

Australia’s gas shortage line has been trumpeted up in recent times by industry sources. Gas prices have been rising as a result. Those rising gas prices have led to a rise in electricity prices. And when wholesale electricity prices reached extreme levels in the first couple of weeks of July, the gas industry lifted its lobbying for a green light for more exploration.

But consider that Australia’s gas supply is controlled by a cartel that has the power to set prices significantly higher than would be the case if the market mechanism was operating. This puts some perspective into the situation. Furthermore, till now there has not been independent corroboration that the shortage is real. The industry has not published convincing figures.

The industry keeps up a veil of secrecy and will not disclose credible figures. This is the very least that should be expected.

The argument being pushed, for example, by Malcolm Roberts, chief executive of the oil and gas industry lobby group APPEA, “Gas-fired plant is ideal for responding rapidly to spikes in demand or sudden falls in renewable output,” and that gas generators were getting squeezed out of the market by renewables and called for policies that encouraged more gas exploration to occur, “otherwise eastern Australia will face a supply side crunch”.

If gas is being replaced by renewables, there is no gas shortage by definition. Perhaps the issue is that the industry wants more gas for export to other countries. But if it is in short supply, surely exporting it at the present rate is not wise? In any case, this does not explain a price hike that does not really occur through the market mechanism, but through significant regulation.

The sore point seems to be the rise of renewables. High on the agenda is the wish to turn around the slowing of coal seam gas exploration and extraction, by presenting a virtual national emergency that necessitates undoing environmental protections and pressing ahead, despite widespread public opposition. Funny thing. Talk about the gas shortage only began after the fall back in CSG.

For these reasons, the wisest reaction would be to distrust the industry’s position. If governments give it the green light, despite the absence of facts, it will say suggest that they are far too close to the cartel and this will open some other pressing questions.

Well before the meeting,  Josh Frydenberg, the federal minister for environment and energy had said: “We need more gas supply. And more gas supplies in Australia.” Media leaks have suggested that more ministers were warming up to the industry. It is an ominous sign.

 

 

 

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