Nation continues to burn its natural gas advantage

There can no longer be any pretence about what we are dealing with — it is a national energy crisis. There are separate gas and electricity crises, with the former playing strongly into the latter. The Australian Industry Group goes further, saying we have a gas “emergency” and declaring an urgent need to divert gas supplies from export customers to domestic supplies. Without increased supplies for onshore use, shortages could disrupt production in some sectors and generation in the electricity market, and certainly will add to the already dramatic price pressures. Malcolm Turnbull has released reports from the Australian Energy Market Operator and the Australian Competition & Consumer Commission detailing how the gas supply shortfall in coming years is three times higher than previously thought. He is urging gas companies to divert resources into the domestic market but is threatening the imposition of export controls forcing these “reservations” if the industry response is insufficient.

This all is bad enough, and the road ahead sufficiently perilous, even without the infuriating knowledge that this has been predicted for many years with governments — state and federal, Labor and Coalition — failing to do enough to stop it. In January 2013 The Australian’s Robert Gottliebsen called for action: “One of the biggest challenges for whoever wins this year’s election is to sort out what has become a horrible Australian energy mess.” A few days later reporter Paul Cleary wrote that Australia was “about to become an extreme case of the paradox of plenty — a gas-rich country that cannot supply its domestic needs”, and he pointed out the “paralysis” in response from state and federal governments. In February 2014 Dow Chemical issued a warning to Canberra about a domestic gas crisis caused by “hoarding” of reserves. “Australian gas reserves are now managed predominantly for the international energy trade,” Dow argued, predicting rising prices would force a future “reservation of gas” for domestic use. “It will only get worse,” Australian Pipeline Industry Association chief executive Cheryl Cartwright warned in our pages in July 2014. “As the LNG projects come on line we will see those same LNG companies that own 80 per cent of reserves also owning 75 per cent of demand — that’s demand for export,” she wrote. “If they have export contracts to fill, what is the incentive for them to provide gas to the Australian market, to Australian manufacturers?”

The Prime Minister highlights drastic cost increases of up to 100 per cent for some companies. Household consumers are hit by steep electricity prices because as we increase renewables and reduce coal, soaring gas costs often dictate wholesale power prices. Mr Turnbull demands Victoria and NSW do more to allow gas exploitation. But in energy markets distorted by interventions it seems only the threat of more intervention will deliver results. We are squandering our energy advantage. Consumers, large and small, are paying for now. But if our politicians don’t improve their policies they, too, surely will pay.