Gas Myths: Australians pay 7th highest prices in world despite being biggest gas exporter

Australia is the biggest exporter of gas, bar none, in the world, yet we are paying the seventh-highest prices for gas in the world. Callum Foote reports on the gas cartel and the myth there is a gas “market”.

Politicians and the gas lobby continue to use artificially high prices to argue that Australia should produce more gas, and open up new gas fields in NSW,  Victoria, Queensland and the Northern Territory for drilling despite the damage to the environment, falling prices for renewable energy, and the fact that we, as a nation, simply do not need it.

Eastern Australian gas prices are the seventh most expensive out of 54 countries surveyed by the International Gas Union for their Global Wholesale Gas Price Survey 2021. Compared to other major gas exporters, prices on the East Coast are sky-high, even 550% greater than the next biggest LNG exporter Qatar, 500% higher than the Russian Federation and 300% higher than the US.

East coast Australians also pay more than twice the amount for gas than West Australians, who enjoy a state policy that reserves gas for the people of the state before it is diverted for export to foreign nations.

The myth of low supply has allowed Australian governments to push for vast amounts of new land to be fracked this year. NSW is the latest, opening up productive farmland in Liverpool plains to more fracking last week. 

According to Bruce Robertson, analyst at the Institute for Energy Economics and Financial Analyse the gas lobby “love talking about shortages because it gives them the excuse to artificially inflate the price of domestic gas.”

NSW joins the Federal and Northern Territory governments in opening a combined 110,000 sq km in new fracking anchorage across Australia last month, and providing tens of millions in new fracking subsidies primarily intended for American billionaires operating in Australia. 

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Gas industry set to collapse in decades

This fervour to open new basins for drilling flies in the face of falling international and domestic demand for gas. Japan, the biggest single purchaser of Australian gas, has announced it will cut its gas use in half in the next eight years and will also consider a carbon border tax in line with the EU, and potentially the US, policies which will punish Australian gas exports further.

Domestic gas use has also fallen 23% since 2014, with a 67% reduction in gas power generation due to the availability of cheaper renewable technologies, despite massive federal government subsidies for the sunset industry.

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So, why is gas still so expensive if more is being fracked every day?

Bruce Robertson, says that the few massive gas players which dominate the east coast gas market act like a cartel, openly engaging in illegal price fixing to keep prices high. This cartel has also ignored undertakings its members have made to provide cheap gas to the Australian consumer without repercussion.

Politicians and the gas lobby have been able to argue for increased gas fracking to address the “supply issue”, despite gas production in Australia reaching record levels in 2020. Any new gas development is likely to be exported increasing Australia’s already disproportionate carbon footprint.

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Gas reservation policy

In 2006, the WA government ensured West Australians receive a fair price for the gas produced in the state with the introduction of the WA Domestic gas policy in 2006. A gas reservation policy ensures that Australians get the first pick of cheap gas before it is exported overseas. The policy seeks to make gas equivalent to 15% of exports available for WA consumers.

As a result, Western Australians pay half as much for their gas as East Australians.

Only the influence of the gas lobby on NSW politics is keeping a gas reservation policy off the cards in NSW. There are big international players behind it: ExxonMobil and BHP in the Bass Strait, Santos, Origin and Shell. 

The NSW Governments “Future of Gas Statement” released last week has allowed frackers to let rip on the Liverpool plains. It was a tactical public relations move designed to make it look like the government was protecting the land while doing nothing to curb the drilling by the gas cartel and some junior players.

The NSW Government congratulated itself on closing exploration licences for Western NSW, despite there being little interest in fracking the region.

The Statement also shores up support for the inexplicable Port Kembla Gas Import Terminal, which even the NSW government admit will lock in even higher prices, and greater emissions, for domestic customers. NSW is therefore set to import gas, despite there being enough in Eastern Australia to supply us “indefinitely” as BHP Petroleum boss Mike Yeager had noted years ago.

While the Australian Energy Market Operator 2021 Gas Outlook does signal that there would be a gas shortfall in 2026, if the current percentage of gas production is exported these shortfalls are, in practice, a fig leaf.

As Bruce Robertson explains “there is always a point where supply theoretically does not meet demand. Gas companies don’t drill new wells until they need to.” As a result, Robertson says that there is “Always a gas shortage looming in future years. In the intervening time, the gas companies use this as a reason why they need more land to drill” despite there being already readily available gas fields at the ready.

The argument made by John Barilaro and the NSW Government for the new Liverpool plains gas field is even more feeble. They claim that if the Port Kembla Import Terminal does not go ahead, despite boasting about its approval, then NSW might need more gas by 2023.

This is a problem which according to Robertson, could “be fixed with a stroke of a pen” if our politicians decided to prioritise the Australian consumer over foreign multinational export revenue with a gas reservation policy.

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