Australia Gas Subsidized By Government Is Being Exported
A new Institute for Energy Economics and Financial Analysis report suggests that Australia’s gas industry majors are acting like a cartel. Subsidized gas is being exported. Despite giving assurances that gas supply to the domestic market would be guaranteed, these companies have been exporting more and more gas in the wake of Russia’s war on the Ukraine. With gas prices skyrocketing around the world, we are seeing Daddy Warbucks’ behavior as massive profiteering takes place.
Domestic users are expected to pay the same price as the countries to which Australia exports even though gas exploration and mining is heavily subsidized by the federal government. This may change with the new government in power. However, so far there has been no sign of this.
“Santos today is reporting underlying profit for the first half of 2022 of US$1,267 million, a massive increase of 300%,” the IEEFA reports. These profits come from the export sale of subsidized gas.
Unfortunately, Australia still uses gas to generate electricity and many homes use gas for cooking and heating. The Australian Competition and Consumer Commission (ACCC) has confirmed that there is enough gas being produced to satisfy both domestic demand and current export contracts.
“The report went on to suggest the east coast gas market has all the features of a cartel-like behavior, including price-fixing and anti-competitive behavior. Such behavior appears to have been confirmed last week when after months of high gas prices (reaching $55/GJ in Sydney), they suddenly dropped to $10–14/GJ following the report’s release,” IEEFA notes.
“The latest Australian Tax Office Transparency report for 2019–20 disclosed that two east coast gas cartel members, Shell and Exxon, paid no income tax on over $20 billion of revenue. Further, Shell paid no Petroleum Resources Rent Tax (the offshore form of royalties) on its huge offshore projects.”
A check of the open NEM over a 24 hour period gives the following figures for gas use in electricity generation: early in the morning — 1 GW of power is being generated by gas (there are also massive inputs from wind); in the middle of the day — 700 MW (with massive inputs from solar). Overall, at this moment, over 30 GW of power is being generated by renewable sources.
Although we currently appear to be in a gas-exporter-created price crisis, it appears that Australia’s reliance on gas to generate electricity will soon be over.
Featured image courtesy of Australian Competition and Consumer Commission (ACCC).
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