Speaker 1: Now on overnights. I have believe in reason and common sense.
Speaker 2: Bleef van Ansolan from mac Road Business with a treasury
Speaker 2: of common sense sense. How are you, buddy?
Speaker 1: Yeah? Good, thanks Phil yourself.
Speaker 2: I'm okay. Australia commits economic suicide by gas. Tell us
Speaker 2: about this?
Speaker 1: Yeah? Now, look, look, I've been bigging on about the
Speaker 1: whole gas issue on radio two GV and four BC
Speaker 1: for a couple of years. Really and really, excuse to
Speaker 1: shoot yourself in the foot, and we've seen some absolute disaster,
Speaker 1: some some more disastrous gas events this week. So just
Speaker 1: to recap, the Rod Gillard labor government back in the
Speaker 1: early tens made the reckless decision to approve liquefied natural
Speaker 1: gas exports out of Gladston, Queensland, without requiring that gas
Speaker 1: first be supplied to Australians. They basically open up, allowed
Speaker 1: the building and then the opening up of these mass
Speaker 1: export terminals out of Gladston, Queensland, which basically freeze our gas,
Speaker 1: put them on ships and then sell out to Asia,
Speaker 1: mostly to China. And gas exports aren't uncommon around the world.
Speaker 1: There's other places that do it. Western Australia does it.
Speaker 1: For example, the United States does it, a whole bunch
Speaker 1: of places to do it around the world, But every
Speaker 1: other jurisdiction except for the East Coast of Australia, which
Speaker 1: has a gas that exports gas, has a reservation policy
Speaker 1: whereby they're required to supply the domestic market first before
Speaker 1: they can export. But for some crazy reason, we decided
Speaker 1: not to do that in the East Coast and this
Speaker 1: polsy era has made as I said, East Coast Australia
Speaker 1: only gas export in jurisdiction in the world not to
Speaker 1: have a domestic reservation policy. And what that's meant is
Speaker 1: that we pay the highest gas prices in the world
Speaker 1: out of every gas export in jurism which is crazy stuff.
Speaker 1: So despite doubling so these gas export terminals came online
Speaker 1: in twenty fifteen in Gladston, Queensland, and since that happened,
Speaker 1: we've actually doubled production gas on the East Coast of Australia,
Speaker 1: yet we're actually supplying twenty five percent less gas to
Speaker 1: the domestic market. So what we're what they're effectively done
Speaker 1: is they've ramped up production, but they've hoovered the gas
Speaker 1: offshore and they're selling most of that to China, and
Speaker 1: we on the East Coast. We export nearly three quarters
Speaker 1: of our gas, but we starve the domestic market of
Speaker 1: gas and as a result, the East Coast price is
Speaker 1: roughly tripled since these exports came online. So back in
Speaker 1: twenty fifteen, we're paying around four dollars a giga duel
Speaker 1: for a gas in these coast. Now we're paying twelve
Speaker 1: dollars plus. It depends on the data. You know, average
Speaker 1: sort of around twelve dollars now, so it's basically tripled.
Speaker 1: But you know, it does go up and down. So
Speaker 1: a couple of days ago was at sixteen dollars, for example.
Speaker 1: And this surge in gas prices on the East Coast
Speaker 1: has actually driven up your electricity bills as well. So
Speaker 1: if you're listening to this in Sydney and Brisbane, your
Speaker 1: electricity prices, as you all know, have gone up as well.
Speaker 1: And part of the reason for that's not the only reason,
Speaker 1: but part of the reason is this surge in gas prices.
Speaker 1: So it's a double way. It's driven up gas prices,
Speaker 1: which is harmed manufacturing. I live in Victoria, where we
Speaker 1: heat our homes of gas that's pushed up those prices
Speaker 1: has made costably being a lot more expensive then, so
Speaker 1: I've driven up all of our electricity prices because gas
Speaker 1: is one of the price centers in the wholesale electricity market.
Speaker 1: So during the election campaign, the Coalition promised to implement
Speaker 1: these coast gas reservation policy was actually excellent policy, and
Speaker 1: what they wanted to do is they want to basically
Speaker 1: force the East Coast gas producers to divert their uncontracted gas.
Speaker 1: So at the moment that they've got these tracts that
Speaker 1: start to expire in twenty thirty all the way through
Speaker 1: to twenty thirty five to supply China mostly, but there's
Speaker 1: also uncontracted gas, which is basically they sell in what's
Speaker 1: called the spot market, which is the uncontracted gas market.
Speaker 1: Just the price fluctuates every day, and the Coalition wanted
Speaker 1: to force them instead of selling that uncontracted gas overseas,
Speaker 1: which they're doing to supply the domestic market, to bring
Speaker 1: down prices and the costume promised to lower these cast
Speaker 1: gas price to blow ten dollars a gigiteel from you know,
Speaker 1: as I said, twelve dollars can be more than that
Speaker 1: depending on the day and the counterfactional to doing this
Speaker 1: fill is before. We don't have a reservation polse, we
Speaker 1: don't fix this problem. We're actually despite the fact that
Speaker 1: the East Coast exports nearly three quarters of US gas,
Speaker 1: we're actually scheduled to start importing gas to open up
Speaker 1: import terminals, import kemel in New South Wales and then
Speaker 1: also in Victoria later and then possibly South Australia. It
Speaker 1: was going to be late this year, but the timetable
Speaker 1: keeps getting pushed out, but it could be next year
Speaker 1: or the year after, and when we start importing gas,
Speaker 1: the price is actually going to rock it even higher
Speaker 1: because at the moment we're basically paying the international price,
Speaker 1: but the export parity price. What that is, it's the
Speaker 1: international price but before you've liquified and before you've shipped it,
Speaker 1: so that the liquefaction process and shipping adds like another
Speaker 1: three dollars a giga jewel more than that often, but
Speaker 1: will effectively be paying the current price of plus a
Speaker 1: significant margin above that, and it could go up to
Speaker 1: twenty dollars. We don't know, so we really want to
Speaker 1: avoid that. But unfortunately Labour's Resource Minister during the election,
Speaker 1: Medaline King, dismissed coalition's gas policy called at the thought bubble.
Speaker 1: Just last week, Prime Minister Antony Albert He's actually I
Speaker 1: think his week before claimed that the coalition's gas reservation
Speaker 1: policy was quote plucked out of a coco. Yes, I
Speaker 1: think I mentioned that a few weeks.
Speaker 2: Yeah, I thought it was quite clever.
Speaker 1: Actually, yeah, we got clever comment for a stupid comment
Speaker 1: as well.
Speaker 2: Yeah.
Speaker 1: So what these comments suggests is that Labour's election victory
Speaker 1: has basically stubbled the prospect of reservation, or that that's
Speaker 1: how it seems. And the upshot is that while we
Speaker 1: nearly while we export nearly three quarters of East Coast gass,
Speaker 1: which most of that goes to China, we don't have
Speaker 1: a reservation. East Coast Australia is facing the prospect of
Speaker 1: having the import L and G. We're facing shortages, We're
Speaker 1: facing the sky high prices, and those sky high prices
Speaker 1: will see the electricity price higher and that's going to
Speaker 1: push up inflation. Send more manufacturing broke because gas, industrial
Speaker 1: heat from gas and just electricity more generally, it input
Speaker 1: to the manufacturing process and if you drive the cost
Speaker 1: of that, we become less competitive. We're going to send
Speaker 1: all this stuff offshore. Now that This is a long
Speaker 1: winded introduction to what has happened this week, which just
Speaker 1: adds even more fuel to the idiocy fire. So this
Speaker 1: week we saw Australia gas idiocy idiocy basically mushroom and
Speaker 1: become worse. So patrolling Australia is like a An industry
Speaker 1: newsletter reported that the country's largest liquified natural gas export
Speaker 1: on ease cast. They're called Australia Pacific LNG, which is
Speaker 1: partly owned by Origin Energy. They've agreed to substantial price
Speaker 1: reduction on their contracted gas with China, which and the
Speaker 1: contract with China's China in effect, which is Chinese communisty
Speaker 1: owned energy firm. So currently this age of Pacific l
Speaker 1: and G supplies China with East Coast liquified gas. They
Speaker 1: provide that seven point six million tons a year, which
Speaker 1: is huge, it's a massive amount. And what they've actually
Speaker 1: agreed to is to cut the price for Chinese buyers.
Speaker 1: And the reason why they want to cut the price
Speaker 1: is because the international gas price has fallen a bit
Speaker 1: and under the contract term they have to renegotiate it
Speaker 1: every couple of years when the price falls. So what
Speaker 1: this is basicly going to do it's going to lower
Speaker 1: the cost for Chinese buyers of our gas at the
Speaker 1: same time as Australians are paying higher and higher prices
Speaker 1: for our gas. Now, the industry estimate is that this
Speaker 1: new contract price is going to be as well as
Speaker 1: thirteen dollars gigdule now. When this price cut was announced
Speaker 1: a couple of days ago, Australia's East Coast spot price,
Speaker 1: so that's the current trading price, was traded at sixteen
Speaker 1: dollars now and local contract prices, so this is a
Speaker 1: lotness of stuff under contract, not failable on the you know,
Speaker 1: on the fluctuating instant market is tracking around fourteen dollars gigdule.
Speaker 1: So what this means is that Australian East Coast gas
Speaker 1: is going to be cheaper in China than it is
Speaker 1: in Australia, which is just nuts. And that's despite the
Speaker 1: fact that it costs you know, three dollars or so
Speaker 1: to liquefy the gas and then the ship it. So
Speaker 1: you know that this is clown show. Stuff fell and
Speaker 1: just to make it worse, Japan and China, so Japan
Speaker 1: mostly against West Coast gas, but China gets East Coast gas.
Speaker 1: Japan and China are both receiving more gas than they
Speaker 1: need from Australia and actually re exporting a profit. So
Speaker 1: again they have these sort of lower prices and then
Speaker 1: they're reselling it in international markets for a profit and
Speaker 1: making money off it. So the other question here is
Speaker 1: why the hell are Australians being starved of their own
Speaker 1: gas and forced to pay more than you know, some
Speaker 1: Asian nations who we sell our gas to. And if
Speaker 1: you see, got even worse phil because just as just
Speaker 1: after this was reported earlier this week and sort of
Speaker 1: from Abu Dhabi in the Middle East has launched an
Speaker 1: eight point seven billion dollar takeover bid for gas giant
Speaker 1: austraining gas giants Santos and they run to export L
Speaker 1: and G trains out of Gladsnes, so they're also sucking
Speaker 1: up our East Coast gas and selling it up short Asia.
Speaker 1: So now it's now the Middle East one in and
Speaker 1: they want to buy that export train, so potentially Straight
Speaker 1: can lose critical natal energy assets to a Middle East
Speaker 1: and conglomic and you know, you have to ask the
Speaker 1: question why are as trains the last in line for
Speaker 1: their own gas? Why are we being starved of our
Speaker 1: own gas which is forcing cost of living. You know,
Speaker 1: I live in Melbourne, as I said, and we use
Speaker 1: gas for heating, so we're paying, you know, through the
Speaker 1: nose to just eat it to heat our homes. I've
Speaker 1: got a gas stove or gas water water. Manufacturing manufacturers
Speaker 1: are paying through the nose for their gas, which is
Speaker 1: seen in the whole bunch of manufacturers broke. We have
Speaker 1: the smallest manufacturing share in the advanced world. We've just
Speaker 1: seen our last major plastics manufacturers shutdown last year, our
Speaker 1: last architectural glassmaker shut down this year. We've seen a
Speaker 1: whole bunch of manufacturers threatened the clothes or downsize, where
Speaker 1: we've lost fertilizer makers. The reason why the companies have
Speaker 1: left is because of expensive energy costs, primarily gas. So
Speaker 1: what are we doing here? And these super high gas
Speaker 1: prices are also forcing up our electricity prices, which again
Speaker 1: feeds into everything in the economy. If Australia doesn't have
Speaker 1: cheap energy, we don't have a modern economy. It's as
Speaker 1: simple as that, and it is the bedrock for modern economy.
Speaker 1: And yet we've got this clown show happening. We're the
Speaker 1: only place in the world on these coasts. It doesn't
Speaker 1: reserve our gas for domestic use first. And we've got
Speaker 1: these these foreign an gas companies and I'm saying even
Speaker 1: Santos it's you know, trade on the Australian sockey change,
Speaker 1: but it's it's primarily foreign owned. But the people are
Speaker 1: in the shares are offshore. So we have all these
Speaker 1: foreign own gas companies which are basically pillaging this coast
Speaker 1: for its gas, starving these coast consumers of gas, forcing
Speaker 1: up our prices, causing our manufacturing sector to move offshore
Speaker 1: and go broak, which costs us jobs, makes us less
Speaker 1: diversified economy, pushed up the whole cost base throughout the economy.
Speaker 1: And you know this is all happened at the same
Speaker 1: time as the Albanie government wants to build one point
Speaker 1: two million homes over five years as the housing target. Well,
Speaker 1: guess what, phil One of the main inputs building homes
Speaker 1: is bricks, right, But brickworks requires which which is one
Speaker 1: of the major makers of Australian bricks. They require gas,
Speaker 1: you know, to make the bricks, and if you make expensive,
Speaker 1: you make bricks expensive. Were therefore pushed up the cost
Speaker 1: of housing. So that's just one mere microcosm of the
Speaker 1: sort of costs we're dealing with you. But the fact
Speaker 1: of the matter is Australia is the second biggest gas
Speaker 1: exporter in the world. We're the biggest coal export. We
Speaker 1: have tons of your owning which you have the cheapest
Speaker 1: energy in the world, or some of the cheapest energy
Speaker 1: in the world. But instead, through idiotic policy and again
Speaker 1: utter neglect from our policy makers and just allow these
Speaker 1: companies to run right on us and do whatever they want.
Speaker 1: We're getting absolutely shafted here. And the fact the matter
Speaker 1: is that Australi's gas belongs to Australians. Our riches should
Speaker 1: come first, and without reservation, Without reserving our gas and
Speaker 1: forcing it to be supplied to Australians first at a
Speaker 1: reasonable cost. This energy inflation is going to continue to rise,
Speaker 1: the cost of living pressures will remain infuding, will remain
Speaker 1: higher than it should be. An Australias economy is going
Speaker 1: to continue to be industrialized. It is that serious.
Speaker 2: Always make a lot of sense. So that's why this
Speaker 2: is the treasury of common sense. And if people want
Speaker 2: to find out more motion leath, where do they go to?
Speaker 1: Mate? Yeah? Thanks Phil, I just go to macrobusiness dot com.
Speaker 1: Dot au