Grattan Institute saves Aussies from Iran gas shock

The global gas shock is building and is going much higher this week unless the TACO comes. If the TACO doesn’t arrive, the gas price will skyrocket by the following week.

But so far, the reaction at home has been completely different from the reaction to the Ukraine War.

The local gas spot price is crashing to prices not seen in years.

As I have said, some of this is weather-related, with power demand down year over year, but that doesn’t explain it.

What does explain it is a shift in the gas cartel’s war-profiteering strategy.

Following years of MB campaigning, which culminated in Peter Dutton’s gas policy during the last election, the cartel may now view discretion as the better part of valour in its approach to its local price gouging.

Consider that the cartel, particularly Origin Energy, has successfully pushed Albo to introduce an East Coast domestic reservation scheme.

Second, Tony Wood, Origin Energy’s top-paid apologist at the Grattan Institute, appeared to fully commit to saving the nation on Friday.

The federal government should impose a windfall profit tax on gas producers who take advantage of the energy shock caused by the Iran war to impose high prices on Australians.

This should have been done in 2022 when the Russian invasion of Ukraine caused the last price shock.

Such a tax should be levied at the rate of 100 per cent of revenue on sales above, for example, the average domestic contract price for the last 12 months. In effect it will deter opportunistic pricing and would not be expected to raise any significant revenue for the government. Real emergencies, such as occurred in 2022, would justify exemptions to the tax. The producers will receive commercially acceptable revenue on domestic sales and will be free to earn whatever windfall profits they can on exports.

Sure, let’s do it. Set the price at $5.50Gj. But let’s not make it a windfall tax based on Australian sales. Let’s make it a windfall tax based on all sales. Better still, make it a permanent export levy, and you won’t need a gas reservation anyway.

And here is the secret that Origin’s blowhard propaganda organ has been rolled out to disguise.

The cartel knows it can’t get away with another war-profiteering episode in Australia. But that is only 25% of its output. Three-quarters of its output is exported, and the cartel is actively profiting from this gas.

First, contract volumes follow the Brent oil, so they are skyrocketing. Secondly, spot volumes have become extremely rare and valuable.

Australia’s biggest gas producers are cashing in on the conflict in the Middle East and the suspension of Qatari LNG production, which has disrupted global supply, with deals struck at more than double recent market rates.

Santos, the country’s second-biggest listed oil and gas producer, finalised a deal with a commodities trader on Wednesday for the sale of an LNG cargo at about $US25 ($35) per million British thermal units (MMBtu), according to market sources, who were not authorised to speak publicly.

It makes the single cargo worth potentially as much as $121 million, based on a typical cargo volume of between 2.7 million and 3.4 million MMBtu.

The deal is worth $70 million more to Santos than last week, when benchmark prices for LNG in North Asia were trading at about $US10.70/MMBtu before the escalation of military strikes across the Middle East.

The deal comes amid unconfirmed reports of two or three trades struck at $US25/MMBtu for one-off, immediate cargoes by producers. The price is well above the $US16.50 futures price for LNG delivered into North Asia for May.

These are windfall profits, too. These windfall profits belong to the owners of the gas, Australians, not the gas cartel.

Yet, you will be shocked to discover that Tony Wood’s local windfall tax proposal will not capture them.

His orders from the cartel are now to hide the cartel’s huge foreign war profiteering, which includes concealing the extent of their financial gains from sales abroad.

The good news is that the shift in cartel strategy means it will protect Australians from another war-profiteering gas shock.

The great global LNG robber barons that Tony Wood serves so diligently are going to deprive Australians of the potential economic benefits that could have been invested in local infrastructure and services, but it appears to me they are not going to apply their war tax at home.

The Grattan Institute is an open dumpster fire of corruption masquerading as a national-interest think tank.

Cue the ABC to discuss Wood’s plan to save Australia.