Energy Security – Digital Finance Analytics (DFA) Blog

Government Policy Makes Households Pay through The Nose For Energy!

The latest forward view of Australian Wholesale Energy Prices out to 2027 show prices for East Coast consumption will remain at nose-bleed levels out as far as 2027, according to data from the Australian Energy market.

There is a reason for this, in that marginal wholesale power prices are remarkably set based on the cost of gas, via LNG in the international markets. This will pressure get worse as coal fired generation is retired across Australia.

Governments of various flavours have messed up here from a policy perspective, in that a small number of international operators are the Australian gas cartel of Santos, Woodside, Origin, Shell, Exxon and friends.

The Governments latest solution to the high price of power, was to set a policy price cap of $12 a gigajoule in the domestic market that is unless cartel members meet certain exemptions such as investing in new gas projects.

That $12 cap was set after receiving warnings from Treasury that energy prices were set to soar by about 50 per cent over 2023 and the first half of 2024. As a result of the intervention, power prices were reduced, by an estimated $230 dollars a year, which is mere chicken feed, given the massive run up in price. Estimates are the average household bill will rise by $700 by mid-2024 compared to June 2022, based on Treasury figures. And In practice the $12 cap is behaving as a floor, as the cartel ships more gas offshore.

All of this means that China who can often on-sells the gas to Europe at a healthy profit, is still seeing cheaper gas prices than in Australia!

The solution of course is for the Government to increase the local reservation and reduce the price cap (floor). But that would bring them up against the political and economic powers of the gas cartel.

So the bottom line is that Australian East Coast households are being taken to the cleaners, one reason why costs of living are so high, while local manufacturers are being priced out, and reducing the capacity for local production.

Which begs the question is this simple stupidity, or something much worse. Who really are pulling the economic strings in the country? Game of Mates anyone?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Government Policy Makes Households Pay through The Nose For Energy!

00:00 / 00:11:19

Government Policy Makes Households Pay through The Nose For Energy!

All of this means that China who can often on-sells the gas to Europe at a healthy profit, is still seeing cheaper gas prices than in Australia!

Which begs the question is this simple stupidity, or something much worse. Who really are pulling the economic strings in the country? Game of Mates anyone?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Peak LNG Stupidity!

Bloomberg reported yesterday that the US has become the world’s biggest exporter of liquefied natural gas for the first time, with 2023 shipments overtaking leading suppliers Australia and Qatar.

The US exported 91.2 million metric tons of LNG in 2023, a record for the country, according to data through Dec. 31 compiled by Bloomberg. The expanded output was due to last year’s restart of Freeport LNG in Texas, which had been shuttered for months following a June 2022 fire and explosion. Qatar, the top LNG supplier in 2022, saw its volumes shrink for the first time since at least 2016, with a 1.9% decline dropping the nation into third spot for shipments of the super-chilled fuel. Australia ranked second, with exports that were little changed from 2022.

Unlike East Coast Australia, the US has a domestic gas reservation scheme in place, which has mostly succeeded in keeping domestic gas prices low.

And the mooted A$80 Billion Deal between Woodside Energy and Santos could also put more upward pressure on Australian domestic gas prices.

“Both Santos and Woodside are material domestic gas producers, which may create market concentration concerns,” RBC Capital Markets analyst Gordon Ramsay said in a note.

It makes no sense to give any member of the gas export cartel – Origin, Woodside, Santos, EXXON or Shell – greater control of gas import volumes. Remember East Coast Electricity prices are driven by the marginal cost of LNG.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Peak LNG Stupidity!

00:00 / 00:07:44

Peak LNG Stupidity!

Bloomberg reported yesterday that the US has become the world’s biggest exporter of liquefied natural gas for the first time, with 2023 shipments overtaking leading suppliers Australia and Qatar.

Unlike East Coast Australia, the US has a domestic gas reservation scheme in place, which has mostly succeeded in keeping domestic gas prices low.

And the mooted A$80 Billion Deal between Woodside Energy and Santos could also put more upward pressure on Australian domestic gas prices.

“Both Santos and Woodside are material domestic gas producers, which may create market concentration concerns,” RBC Capital Markets analyst Gordon Ramsay said in a note.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Energy Bills: You Ain’t Seen Nothing Yet!… [Podcast]

The UK is an object lesson in stupidity as energy prices go higher and bills to households more than double in a few short months. Some are threatening to start a payment strike, as people will be forced to trade off heating versus eating.

But we in Australia are, according to the recent RBA Statement, also exposed to persistently rising energy bills. This is of course caused by the gas cartel as I have been highlighting. But the truth is, where the UK is going we may well follow, so expect persistent higher inflation in coming months. UK inflation is predicted to reach 13%, thanks to high energy costs – so just how high will we be going?

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog

Energy Bills: You Ain’t Seen Nothing Yet!... [Podcast]

00:00 / 00:16:56

Energy Bills: You Ain’t Seen Nothing Yet!…

Go to the Walk The World Universe at https://walktheworld.com.au/

Held Out To Dry By The Powerful!

The head of the United Nations has accused oil and gas companies of “grotesque greed” and urged every government to impose a windfall tax on their “immoral” record profits. António Guterres, UN secretary-general, said money made “on the backs of the poorest” must be returned to the most vulnerable households just days after BP and Shell reported massive profits in the wake of the Ukraine crisis.

Tony Wood, the head of the energy program at the Grattan Institute in an opinion piece in the AFR, says that the latest, six-monthly Gas Inquiry Report released on Monday by the Australian Competition and Consumer Commission (ACCC) does not go far enough. The findings of the latest Gas Inquiry Report make for depressing reading. The concerns identified are severely harming both gas and electricity consumers, and we have not yet seen the worst.

We covered this report in an earlier show, and also discussed it last Tuesday on our live show with David Llewellyn Smith. Put simply the Energy cartel are taking Australians to the cleaners, and making excess profits in the process – largely war-induced thanks the Russia Ukraine situation. 97% of the Gas conglomerates are offshore owned, and so the excess profits are going offshore, whilst crippling the local economy, businesses and households.

Tony Wood makes the point that the stated objective of Australia’s national gas market is to supply natural gas services for the long-term interests of consumers. But this is simply not the market described in the latest ACCC report.

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DFA Live Q&A HD Replay David Llewelln-Smith: Fixing Energy Now [Podcast]

This is an edited version of a live discussion about the current state of economics and politics, with a focus on the busted energy markets with David Llewelln-Smith Chief Strategist at @NucleusWealth and founding publisher and editor for @Macro_business. Go to the Walk The World Universe at https://walktheworld.com.au/ Original stream and chat here: https://youtu.be/4AhEaWqOpAU

Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay David Llewelln-Smith: Fixing Energy Now [Podcast]

00:00 / 01:24:53

Energy Prices Is No Gas…

Like it or not, we have been caught up in the global boom in gas prices, which have been driven by bad Government policy locally, and the Ukraine Russia conflict, with the latter using gas as a lever of coercion, reducing Nord Stream flows to 20% and forcing up the price of the commodity and for European countries to grab supplied at any cost from anywhere else.

Data from the Australia Energy Regulator highlights how much prices have risen, with prices significantly higher than a few years ago, based on $ per gigajoule. last week Natural-gas prices soared in European with the benchmark gas prices rising 12% to 198 euros per megawatt-hour.

There will be a very timely DFA Live show tomorrow night with David Llewlyn-Smith, the Chief Economist at Nucleus Wealth, where we are going to explore these issues and ask what can be done. There is, he says an answer which would reduce energy prices substantially across Australia, it just takes political will.

So today we look at the state of play and some of the levers which might be pulled. The ACCC has today released forecasts showing that the east coast of Australia could face a shortfall of 56 PJ in 2023. At the same time last year, their Gas Inquiry interim report found 2022 could face a 2PJ shortfall. “Our latest gas report finds that the outlook for the east coast gas market has significantly worsened. To protect energy security on the east coast we are recommending the Resources Minister initiate the first step of the Australian Domestic Gas Security Mechanism (ADGSM),” ACCC Chair Gina Cass-Gottlieb said. “We are also strongly encouraging LNG exporters to immediately increase their supply into the market.” The root cause problem is that much of the gas produced in Australia’s east coast is produced by companies that are also LNG exporters.

Thus, we are exposed to the worst of the global markets, as LNG (the liquified form of the Gas) is sold internationally. In fact, by value it recently became one of our biggest exports – especially to China. The ACCC’s report raises concerns about the high level of market concentration, noting that LNG exporters and associates had influence over almost 90 per cent of the proven and probable (2P) reserves in the east coast in 2021 through direct interests, joint ventures and exclusivity arrangements.

Go to the Walk The World Universe at https://walktheworld.com.au/