Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here’s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Jumpin’ Jack Flash? It’s ‘bout gas, gas, gas!

By Geoff Carmody - posted Friday, 12 May 2017


Probably.

At present, Australian governments are intervening to affect gas supply, and where it goes:

  • Some state governments have refused to permit the development of some (on-shore) gas deposits for various reasons.
  • Most recently, the Commonwealth Government has threatened to use export control powers to restrict the allocation of local gas production to exports from 1 July 2017.
Advertisement

On the face of it, the second of these is an example of governments trying to get an arbitrage-like market result (diverting more local supply to local demand to meet high local prices, with less exports into lower-priced markets).

The first is just curtailing local supply, wherever it might be sold. This behavior comes despite official advice (such as that from the NSW Chief Scientist in 2014) that:

Unconventional gas production is now a major industry especially in North America where, on balance, it is generally highly valued because of the energy security it provides. On the back of this, there is now considerable investment and experience in the development and refinement of technologies to maximise production while minimising adverse impacts. In Australia related technologies have now been extensively deployed successfully for some years (including at Camden in NSW). The independent petroleum engineering, geological and geophysical experts advising the Review consider that such technologies (including fracture stimulation and horizontal drilling technologies), with appropriate safeguards, are suitable for use in many parts of the sedimentary basins in NSW, noting that drilling in any new location is, to an extent, a learning-by-doing activity as there will always be local geological attributes specific to an individual resource development. These activities can and should be guided by companies investing in geophysics and other characterisation techniques to inform the best drilling and extraction approaches to take.
(Emphasis added.)

If the focus is on immediate market symptoms, you might want to give a tick to the second response, but a cross to the first. But does either increase supply, thereby lowering prices, over time?

All government interventions have longer term effects. Both of these responses will reduce total gas supplies over time. Instead, they increase the supply (yet more) of 'sovereign risk', both ex ante, for possible future investments, and ex post, via retrospective impacts on income flows from past investments made under a different set of rules. (Of course, if current governments don't care about anything beyond the next year or three, they probably won't give a stuff about anything but 'announceable appearances' of delivering symptomatic relief.)

Governments are at least partly to blame for the current gas market situation. The longer term effects of their policy interventions, if they are maintained, are likely to be perverse.

Advertisement

Is business to blame?

Maybe/don't know. Two central questions:

  • Do contractual commitments prevent market arbitrage operating right now? If so, why and how?
  • Is the policy environment right now chilling the investment climate for boosting local gas supply?
  1. Pages:
  2. 1
  3. 2
  4. Page 3
  5. 4
  6. 5
  7. All


Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

15 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

Other articles by this Author

All articles by Geoff Carmody

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 15 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy