Why Gas Giants Stopped Overcharging
By Ian Verrender
Topic: Oil and Gas
The export giants are trying to avoid repeating the price gouging from three years ago.
It's a miracle!
After many years of failed threats, the east coast gas export giants are now putting Australians first.
While gas prices are high in Europe and Asia, Australians are being protected.
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This situation is unexpected based on past experiences.
Qatar has stopped gas production due to Iranian drone attacks.
Over 20% of the world's LNG supply is stuck in the Gulf, causing global energy shortages.
The closure of the Strait of Hormuz is affecting global fuel supplies.
Four years ago, a similar situation led to Australian domestic gas being sent offshore for profit.
This time, we have been spared from high gas prices.
Gas prices can cause more economic damage than petrol and diesel prices.
Soaring gas prices contributed to inflation and high electricity costs in Australia.
Gas is used in power generation when coal and renewables are not enough, so its price affects electricity costs.
What's different this time?
The east coast gas giants are afraid of new laws and higher taxes, so they are being cautious.
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The competition watchdog says the three gas giants control almost the entire eastern market.
The ACCC notes that the exporters have influenced domestic gas prices with their market power.
For two years, the exporters took more gas from the domestic market than they supplied.
West Australian gas exporters have had to ensure domestic supply for over two decades, but not on the east coast.
Gas producers are being cautious this time.
The Santos-led consortium wrote export contracts for more gas than it could extract.
The outcry from manufacturers led to government intervention.
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A gas reservation policy will ensure Australians have access to their own gas supplies.
The principle has been accepted, but the design has not been finalized.
The export giants are trying to avoid a repeat of the price gouging from three years ago.
Average gas prices have declined since the 2022 spike.
Average gas prices remain less than the peak in 2022.
The reservation policy and windfall profits tax are causing fear among gas export executives.
A Senate Select Committee will explore the windfall profits tax this week.
Despite international energy market turmoil, gas prices have fallen.
That's half the level of the Ukraine crisis peak.
The recent price action shows the export giants' market dominance.
European gas prices are 30% higher than before the Iran war.
Companies closed, jobs lost
Many power-intensive industries have been hurt by high gas prices.
The urea plant on Gibson Island near Brisbane was forced to shut down in 2021.
Incitec Pivot was unable to secure a long-term gas supply.
Most of Australia's urea supply comes from the Persian Gulf.
The prime minister secured 250,000 tonnes of urea from Indonesia.
Sovereignty vs sovereign risk
The war in Iran is rewriting the trade textbook.
Globalization is being wound back, and nations are seeking self-reliance.
Greater government involvement in the global economy will be needed.
The federal and West Australian governments are investing in a new domestic urea processing plant.
The plant will open in 2027 and produce 2.3 million tonnes of fertiliser per year.
Greater tax-raising measures will be needed, particularly for resource companies.
Resource companies will come under pressure to pay their way.
The Petroleum Resource Rent Tax has been criticized for extracting minimal tax.
Gas exporters are preparing to campaign against a new tax.
But where exactly would they go?
To borrow a line from Crocodile Dundee: 'You call this sovereign risk?'
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