Surprise! Australia’s Green Transition Energy Price Caps are Causing Supply Side Chaos

Essay by Eric Worrall

“… The gas industry is still behaving like a bunch of bullies and effectively looking like they’re withholding supply, …”

Gas price caps haven’t been silver bullet the Albanese government was hoping for 

Industry behaving like a ‘bunch of bullies’ and potentially withholding supply, users say, while producers argue intervention has ‘paralysed the market’

Peter Hannam Tue 17 Jan 2023 01.00 AEDT

Strains in the gas market have not been eased by the Albanese government’s price caps imposed late last year, with an industry group claiming supply shortages remain while the peak gas lobby is warning the sector has become “virtually paralysed”.

One month on from the government’s rare intervention to limit domestic gas prices to $12 a gigajoule and black coal to $125 a tonne, big commercial gas users are hoping new compliance guidelines to be released soon by the Australian Competition and Consumer Commission will force suppliers to provide an adequate supply.

“The gas industry is still behaving like a bunch of bullies and effectively looking like they’re withholding supply,” said Andrew Richards, CEO of the Energy Users Association of Australia (EUAA). “You would only withhold supply if you had market power.”

Samantha McCulloch, the chief executive of the Australian Petroleum Production & Exploration Association (Appea), said the government’s intervention had resulted in “a chilling of the market” at a time when the sector needed more investment to boost supply.

“The gas industry has sought clarification of a number of practical questions and issues regarding the implementation of the price cap and we are still waiting for guidance from the regulator,” McCulloch said. “The lack of clarity on how the price cap order is to be applied alongside the threat of permanent gas price regulation has virtually paralysed the market.”

Read more: https://www.theguardian.com/australia-news/2023/jan/17/gas-price-caps-havent-been-silver-bullet-the-albanese-government-was-hoping-for

WUWT foresaw price caps would lead to an availability crisis back in June, when the the Aussie government started capping energy prices and expropriating energy companies.

You would have to be a socialist to believe there could be any other possible outcome.

The only question is, since energy price caps are failing to deliver the politically desired outcome, what is the government’s next move?

My guess is energy company nationalisation. Some major energy assets are already government owned, and the Victorian Dan Andrews government recently made moves in the direction of energy asset nationalisation. In my opinion, it is only a matter of time until the left wing radicals who run the Aussie Federal Government attempt to fully nationalise the Aussie energy industry.

Given the Aussie government’s track record of expropriation and trampling of property rights during the imposition of energy price caps, I’m guessing the current owners of Aussie energy assets will be less than satisfied with any compensation offered, if their plant and equipment is nationalised.

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Tom Halla
January 16, 2023 6:12 pm

Nixon and Carter tried price controls during the two oil shocks. Inevitably, there were shortages.
Outright expropriation will merely reveal the incompetence of the governments policy, which acts as if their “greedy capitalists” rhetoric is real. Someone has to finance exploration and development, and the Labour/Greens will realize just how inefficient socialism really is. Or not, they might really be that dedicated to The Cause.

Scarecrow Repair
Reply to  Tom Halla
January 16, 2023 6:14 pm

Expropriation will just allow them to hide their even higher costs behind tax increases, while lowering the public-facing prices.

Janice Moore
Reply to  Scarecrow Repair
January 16, 2023 6:31 pm

Big tax hikes are never hidden. People detest and protest them. That’s why socialism is, ultimately, enforced through

“the barrel of a gun.”

MarkW
Reply to  Janice Moore
January 17, 2023 8:44 am

They are hidden when it’s someone else who is supposed to be paying the taxes.
The rich, businesses, etc.

Robertvd
Reply to  Scarecrow Repair
January 17, 2023 12:42 pm

Or just print the Aussie dollar into worthlessness killing everyone’s savings Zimbabwe style.

Mariner
Reply to  Tom Halla
January 17, 2023 1:02 am

Socialism never fails. Its ultimate aim is to destroy the existing free market system and it succeeds everywhere it is impemenented.

Scarecrow Repair
January 16, 2023 6:12 pm

It has always boggled my mind that these idiots can’t see past the end of their nose, but I finally understand why: their noses grow too fast for their eyeballs to keep up.

rhs
January 16, 2023 6:21 pm

Australia just needs an activist Kool aide drinking group like this to help drive down the demand for gas:
https://freebeacon.com/biden-administration/meet-the-green-energy-group-behind-the-study-thats-driving-calls-to-ban-gas-stoves/amp/

Shoki
January 16, 2023 6:32 pm

Gee, I know how to fix this. The government should get in the gas business.

roll-eye-emoji.png
Martin Brumby
January 16, 2023 6:33 pm

Maybe Venezuela will give them some useful hints in how to make energy work, in a workers and peasants paradise?

Editor
January 16, 2023 6:45 pm

You would only withhold supply if you had market power.
Or if you couldn’t make a profit. Or if you could sell at a higher price elsewhere. Or …..

John the Econ
January 16, 2023 6:46 pm

If only there was a field of study dedicated to predicting this sort of outcome that leaders could consult before making bad decisions.

abolition man
January 16, 2023 6:50 pm

I’d chortle about how the mighty have fallen, but I live in the US, so I feel constrained from throwing any stones at the moment! One might believe that the WEF puppets in our Western governments have gotten out ahead of their skis, but the result of their falling might be an avalanche larger than anyone has ever conceived!
At the moment there does not seem to be anyone who has any good ideas on how to put Humpty Dumpty back together again; the elites are on the verge of completing their plundering of Western economies and the rape of Liberty!

Reply to  abolition man
January 16, 2023 8:44 pm

abolition man,
Abundant people have given the cure for Australia.
Ditch the consequences of the Paris Agreement, ditch all net zero plans and steadily return to the low-cost, highly-reliable, well-understood generation of electricity as it was done before 2005, while making a fast adoption of nuclear power.
Simple.
Geoff S

Retiredinky
Reply to  abolition man
January 17, 2023 6:58 am

The great “red wave” failed to materialize – what really happened is the Democrats won the election, they gained one seat in the Senate and only gave up control of the House by a few members. Essentially the American people voted FOR the “Great Reset” and/or the war on climate change. You get what you vote for. America better wake up – I think it is too late.

Editor
Reply to  Retiredinky
January 17, 2023 12:05 pm

The way I saw it, the great “red wave” was there for the taking and Donald Trump stuffed it up. The people wanted a red wave, but not one led by DT. Politically, DT is dead in the water, and the worst he can do now is to wreck Republicans’ chances at the next presidential election. Unfortunately, it is looking like he will actually do his worst. What a miserable prospect for all of us.

Joe Crawford
Reply to  Mike Jonas
January 17, 2023 3:17 pm

Sen. Lindsey Graham of S.C. screwed it up much worse than Donald Trump when he proposed a national bill to make abortions illegal. After the Supreme Court declared that a “women’s right to chose” was not defined as a right in the Constitution the Republicans were all stating that it was an issue for each state to decide. Each state could then chose whether to make abortion legal or not and that seemed to satisfy most Americans. Then, Lindsey Graham introduced his bill and almost immediately lost most of the women’s vote for Trump. Regardless of his (i.e. Trump’s) personality, he sure did a much better job of running the county that Biden. It’s a shame Lindsey torpedoed his return to office.

Streetcred
January 16, 2023 7:21 pm

In Australia, the main problem is that not enough gas is reaching the local market as it is mainly exported (we have little manufacturing industries left, only resources to sell) and the politicians reap windfall royalty income (consequence of international pricing) at the expense of the local retail consumer … those windfall royalties are not returned to the retail customers but are applied to subsidizing renewables operators.

To decouple local pricing, simply adjoin local gas supply volumes to the gas export volumes. More export gas, more local gas supply, price comes down.

Last edited 19 days ago by Streetcred
Rod Evans
Reply to  Eric Worrall
January 17, 2023 3:15 am

That is the whole essence of the gas supply issues currently. The state restricting national extraction via licence or as in the UK a straight forward ban on extraction is why the market is skewed and unstable.
The UK would be a net exporter of gas if the ban on extraction of shale gas was lifted. Currently the UK is a net importer, how ridiculous is that? Maybe Australia is looking to emulate the UK policy of industrial self destruction?

MarkW
Reply to  Streetcred
January 17, 2023 8:47 am

Why do you believe government has the right to tell companies what they can and can’t do with their product?
How is your proposal any different from the current government policy of capping the price for gas?

mleskovarsocalrrcom
January 16, 2023 7:23 pm

That’s the intent. Everyone seems to be knocking the AGW crowd for the wrong reasons. The goal is to bankrupt industrial nations and drive poverty levels lower until the people revolt.

MarkH
January 16, 2023 8:26 pm

It doesn’t take a rocket surgeon to figure out that when you put price caps on, you’ll just end up with supply issues.

I better get to ordering that gas cylinder refill, so I have two full bottles. That gives me about 6 months of cooking and water heating (supplemented by solar hot water). This is something that the control freaks don’t like. They want to be able to control when you cook, and for how long. They want to be able to turn off your power, or even at the appliance level, should you “exceed your allowance” or, heaven forbid, say something that they don’t agree with.

Janice Moore
Reply to  MarkH
January 16, 2023 8:59 pm

Amen, Mark H..

And, thank you for a smile at your deftly combining two apt metaphors. 🙂 Yes, indeed, neither a rocket scientist nor a neurosurgeon are necessary to accurately assess the utter foolishness of price controls.

Chris Hanley
January 16, 2023 8:32 pm

The gas industry is still behaving like a bunch of bullies and effectively looking like they’re withholding supply,” said Andrew Richards, CEO of the Energy Users Association of Australia (EUAA)

It is surprising to see Peter Hannam going to a representative of genuine industry energy users for a comment.
Mr Richards’ résumé at the EUAA website has a general description: “Andrew has over 30 years of energy industry and infrastructure development experience …” etc. However it omits more detailed information available on his Linkedin page including:
“Immediately prior to his current role, Andrew spent 16 years at leading Australian renewable energy company Pacific Hydro. In his role of Executive Manager, External Affairs he led a team who managed media and public relations, corporate marketing, community engagement, reputation enhancement, government affairs and policy development … … Andrew has also been active with various industry associations having been a director and president of the Australian Wind Energy Association, director and deputy chair of the Business Council for Sustainable Energy and was a founding director of the Clean Energy Council having also played a central role in its formation”.
It is another example of an ostensibly industry-based association actually being lobbyists for a leftist cause.

Last edited 19 days ago by Chris Hanley
Chris Hanley
Reply to  Chris Hanley
January 16, 2023 8:46 pm

Innocuous-sounding Pacific Hydro is owned by China’s State Power Investment Corporation (Wiki).

Reply to  Chris Hanley
January 16, 2023 8:47 pm

Chris Hanley,
Thank you for that. Our energy sector has had a succession of people with tainted backgrounds, as if there is an Australian recruitment company or two specialising in staff appointments from those trained on the wrong side of the sheets. Geoff S

January 16, 2023 8:58 pm

Samantha McCulloch, the chief executive of the Australian Petroleum Production & Exploration Association (Appea)”
Samantha, if you read this, you should be lawyered up and ready.
In my younger days when Keith Orchison was managing APEA, threats of price caps were rare because the industry knew how damaging they were and policy makers knew how much of their futures depended on trouble-free, low-priced, dependable oil and gas supply. Call us bullies if you like, but we were quite successful and society had large benefits.
On the non-hydrocarbon minerals sector, we had AMIC with managers like Lachlan McIntosh who had first hand experience with nationalisation as demonstrated by our Peko-EZ case of appropriation without compensation in the East Alligators uranium province, later known as Kakadu national park.
That type of episode was so damaging that just about all in the industry vowed to prevent it again. We had some success, but not enough, it seems. Geoff S

Chrism
Reply to  Geoff Sherrington
January 16, 2023 11:40 pm

Geoff (and others) thanks for these pieces of information – It would be great to read a more detailed account of this : this history is lost – I wrote in The Oz newspaper blog under Rachel Baxendale’s article that Venezuela had arrested bakers who ran out of flour for a charge of ‘refusing to bake bread’ : and innocently asked when might the first gas executive arrests happen in Australia (after the ‘excellent’ work done by government to ‘save’ our industry that requires gas): too hot potato for 21C Australia – they ‘rejected’ my comment – so much for free speech in Ruperts Australian newspaper

Last edited 19 days ago by Chrism
RogerRocks
January 16, 2023 10:13 pm

Somewhere back in the Alan Carpenter government of Western Australia, Mr Carpenter told the gas companies that they could only develop a new gas field if they reserved a certain percentage for local use. The gas companies played tough, saying that this was unacceptable and that they would take their bat and ball and go home. For a day. Then they caved in.
As a result WA has cheap plentiful gas, while the more cowardly eastern states of Australia are paying through the nose.

MarkW
Reply to  RogerRocks
January 17, 2023 8:52 am

Ahh, the great socialist way. Force others to lose money, so that you can have more free stuff.

Coeur de Lion
January 17, 2023 1:31 am

What has happened to Australia? Land of gallant ANZACs and gorgeous women?

Mr.
Reply to  Coeur de Lion
January 17, 2023 6:48 am

It took just one term of national government by Labor with Kevin Rudd at the helm for the socialist Fabians movement to complete its “long March through the institutions”.

ANZACS are no more, replaced by soi boys with hair buns, and gorgeous women insist on being called “they” rather than “love”.

Ed Zuiderwijk
January 17, 2023 2:08 am

To stop this lunacy the energy producers themselves should be prepared to act even more radically than the deluded idiots that rule the country.

Declare an industry-wide two week holiday. Send everybody home, close down the whole operation lock stock and barrel. After two weeks offer to return to work on condition of being left alone so you can do the job.

Rod Evans
January 17, 2023 3:09 am

The most frightening sentence you are likely to hear.
“We are from the government, we are hear to help”…….

David Dibbell
Reply to  Rod Evans
January 17, 2023 5:24 am

When I read your comment, it came through in my head in Ronald Reagan’s voice. We need another like him.

The Other Nick
January 17, 2023 6:16 am

From what I understand the gas price cap of $12 a gigajoule applies from the gas producer to the domestic middleman/industrial buyer.
 
It has no effect on what the producer charges for their international contracts/supplies.
 
What this is not doing is lowering the household cost of gas. The middlemen are just upping the price using ‘lack of supply’ as an excuse. 
 
 

MarkW
Reply to  The Other Nick
January 17, 2023 8:55 am

If you are a businessman and you can sell to one customer at 20 dollars, and the government says that you can’t charge someone else more than 12 dollars, who are you going to sell to?
If the government than says, you can’t sell to the first customer, how is that not theft of services?

Last edited 19 days ago by MarkW
Tony_G
January 17, 2023 7:06 am

Weren’t we told this wouldn’t happen?

DMacKenzie
January 17, 2023 8:18 am

Governments want to control energy. Energy is usually a big part of a population’s expenditures and a bigger cut of the pie is in their dreams. They are convinced that money under their spending control is a good thing. As far as energy, they don’t even need to officially tax consumer-level energy consumption to get control. Governments especially love this indirect taxation because when Joe public starts feeling too much of his money is being confiscated, government officials start feeling unsafe…and the whole point is that they want to feel lofty and loved. Carbon emissions are an ideal control methodology for them. Nationalization of energy companies that either go broke or charge too much are simply part of the plan.

Dennis Gerald Sandberg
January 18, 2023 9:58 am

It’s official, Australia has knocked Germany out of the first place ranking in the climate and energy nut-job contest.

smalliot
January 20, 2023 7:36 am

Just as I can’t understand how someone can be elected governor while refusing to debate their opponent, or a person with brain damage win a seat while being unable to think, Australia following Venezuela down the nationalization hole makes no sense. But then again I still can’t understand how any democrat can be elected after paying $700 for LPG this year while in 2019 paying $98 for the same amount.

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