End gas price virtue signalling and cap exports

The Australia Institute has found that the Federal Government’s gas policy actually keeps prices high for Australian consumers and recommends a cap on LNG exports in its submission to the review of the Australian Domestic Gas Security Mechanism (ADGSM).

The submission finds that the Government’s export gas trigger entrenches high gas prices by allowing LNG companies to supply just enough gas to the domestic market to avoid the trigger, but so little that prices remain high.

Policy should focus instead on capping LNG exports to reduce domestic gas prices and also on ways to help households and industry reduce gas use.

“Current gas supply policy is little more than virtue signalling,” said Mark Ogge, Principal Adviser at The Australia Institute and author of Institute’s submission.

“The Minister signals intent to declare a shortfall and pull the gas supply ‘trigger’, but is then obliged to consult with the gas industry.

“The industry can always avoid real action by supplying the absolute minimum amount of gas needed to avoid the trigger, keeping prices high.

“The Minister can claim to have cracked down on gas companies and the companies can claim they’re supplying domestic gas. Everyone is a winner, except Australian gas customers.

“If the Government is serious about reducing gas costs for Australian customers, there are two obvious things to do.

“Firstly, reduce gas use through energy efficiency and fuel switching to electrical systems for space and water heating, electrification of transport and other sectors.

“Secondly, placing a cap on LNG exports would ensure that gas saved by efficiency measures and switching would go to Australian users rather than being exported by LNG companies.

“Policies like gas reservation, or the domestic supply trigger have limited potential to push down prices and ensure gas savings and new developments aren’t exported.

“Countries such as Norway, Saudi Arabia and Malaysia derive far greater revenues and generally enjoy lower domestic prices than Australia, yet they have no problem attracting investment in their oil and gas industries.”

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