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Apr 27, 2017

Gas companies -- especially Santos -- have brought regulation on themselves

Australia's gas companies have forced Malcolm Turnbull to impose export regulation on them. And all of us who backed liberalisation of energy markets have to accept we were wrong.

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The Prime Minister has handled the “gas crisis” exactly right. Six weeks ago, he warned gas exporters to sort out domestic supply or he would do it for — and to — them. They haven’t, so today he will, via a “Australian Domestic Gas Security Mechanism”, which will halt exports if needed for domestic consumption.

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21 comments

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21 thoughts on “Gas companies — especially Santos — have brought regulation on themselves 

  1. Ben.

    Nice to see the mea culpa on privatisising energy there, could have been an article on it’s own given the previous passion expressed many times, it’s just a shame it’s come after most of our energy has been privatised, mostly against the will of voters.

  2. Nereus

    A Government regulation requiring gas to be sold to the domestic market can be implemented no doubt – but at what price? If the prevailing world price is applied (less transport costs) one wonders how happy consumers will be – though industry will benefit from security of supply. But could/would Government regulate the price? That implies real loss of profit to the gas producers, and while I am not a lawyer one also wonders how long that would take to reach the High Court under Section 51(xxxi)? And a disclosure: I am a current shareholder in Santos.

  3. leon knight

    Hardline regulation indeed – if Turnbull has the cojones to actually do it – I will believe it when I see it.
    More likely he has some devious plan to force increased fracking onto the States that are exhibiting some sensible caution with it.

    1. Pedantic, Balwyn

      I absolutely agree with Leon Knight. There will be let off for the Gas Industry in the detail. Probably something about cutting red tape to allow fracking, and denying State’s Rights. Lucky Alan Jones is still on board with the anti fracking lobby.

      1. mary wood

        My fear is that states will be forced to allow fracking. The reason for the bans is that the farmers and a large number of the public do not see good reason to endanger good agricultural land and/or ground water supplies. But when was the last time the public, as opposed to pressure groups and business, was heeded.

  4. DF

    The only thing that has changed in all this are the minds of those who believed the market always works for the best. The whole shebang started going downhill when the State Govts flogged off their utilities and assets. Anyone with any understanding of how capital works could see then that it would all end in tears.

    1. IanG

      Absolutely DF. What’s the difference between the market is always right and, as BK words it “relentless opportunism of industry players to game the system and exploit every opportunity to jack up prices” – that sound like “the market” in a near monopoly industry to me. Highly predictable really!

  5. rlynch01@bigpond.com

    Unfortunately the power suppliers have been scammers all along. You reckon that they will be classified as “bad debtors” like the Centrelink minority? You reckon they will have to pay the missing tax? In my 50 years as a taxpayer, I did, but now I’m a “bad debt”. Will these clowns be exempted from tax under the long-term coalition subsidy for big business?

  6. John Cotterell

    I am walking around with a big smile. At last someone in the government has decided that enough is enough and handed out a thick ear to rorters. It won’t last but even once is nice for a while.

  7. A Wright

    If you really want to see if Malcolm Turnball has had any effect on how these Companies operate then the litmus test is Shell.
    Shell started by putting their LP Gas prices up well above the rest of the market, well and truely over priceded their LPG. $0.799 compared to other operators who were $0.659, a massive difference. More recently they have started removing LPG from their service stations, not interested in selling on the local market anymore. They should be forced to re-establish all of their LPG outlets and lower their prices to match the other operators. Then we will know that Malcolm was listened to.

  8. Dog's Breakfast

    Your mea culpa is accepted Bernard. All I ever hoped for was recognition that untramelled free markets are in fact a recipe for exactly this, what capitalism does best.

    Apparently a story in the Australian claims that the problem is actually supply. No change from them, apparently being the world’s largest exporter of LNG means we have a supply problem. They are unreconstructed dolts.

    Prices should also be regulated to the cheaper of either the world spot price for gas (less shipping costs, or the contract costs they have entered into for long term contracts. No way that a nation 5,000 kms away should be paying less for our gas than we are.

    ‘Sovereign risk’ – how about incompetent and greedy capitalist risk.

  9. bushby jane

    Pretty sure that there are a lot of companies out there that wished he had acted a lot earlier. Have we been told what the price will be, proof will be in the pudding.

  10. shea mcduff

    ” And all of us who backed liberalisation of markets have to accept we were wrong.”

  11. Steve777

    It’s only “sovereign risk” if Labor does it.

  12. Steve777

    A “free market” is as elusive as any socialist utopia. Without proper regulation, markets quickly evolve into monopolies or cartels. The big players will always tilt the playing field in their favour. They will squeeze out new entrants and weaker competitors by any means they can get away with.

    “The market” is a vast and complex monster, driven alternatively by greed and fear, charging hither and yon. And from time to time it charges over a cliff, taking peoples’ savings, hopes, livelihoods and homes with it.

  13. AR

    Others have noted BK’s mea culpa and I would also give him 2 cheers were it it not for “All of us who have advocated free markets … we need to accept that liberalisation has dramatically failed in energy.”
    No, not just energy, wherever monopoly exists as Adam Smith pointed out – “merchants seldom meet, even socially, without there arising a cartel against the customer” – this being the Invisible Hand so lauded by neolibs & assorted apologists.
    I will not hold my breath waiting for Talcum to deliver anything meaningful – as pointed out above, this will inevitably lead to more demands for fracking as the affronted BigAr$e end of town wriggles and with a single bound is free.

  14. klewso

    Would we have had this “crisis” if prices had stayed at projected levels and not dropped to those that meant companies had to export all they could to realise projected profits?

  15. Duncan Gilbey

    This will be as successful as Turnbull’s ‘cheaper, faster, sooner’ NBN…

  16. Philip Stott

    I want to know would Turnbull have any power or discretion to impose export regulation if we were signed up to the TPP. I rather think not.

  17. Dougz

    An important reason we’re facing this fiasco is that we no longer have an over-arching National Energy Policy. Malcolm Fraser formed the National Energy Advisory Committee back in the seventies and that extended the capability of various government departments in planning how our energy needs were developing in response to both population and economic growth.
    It’s the job of our technocrats, particularly engineers, to be able to plan this out.
    Whether its energy/power, sewerage treatment, water supply we have had, over the years, government departments staffed by engineers that plan and oversee the construction of this infrastructure.
    Of course there is no NEAC today as apparently we now believe the “Market” will allocate the resources we own (gas) to maximise the benefit to the nation!
    Even some fellow from the Grattan Institute suggested the current situation was hard to predict.
    Actually, if you have the qualified professionals addressing our infrastructure needs it is not hard to predict and this farce would have been avoided.
    Of around 200 parliamentarians, I don’t think there is one engineer!
    And the prevailing ideology has been to “let the market rip”, so the country with the world’s biggest exporting gas field, ends up with the world’s highest domestic gas prices and a dismal return on our exported gas.
    Brilliant!

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