The energy price “debate” and demands that the government do something about soaring gas prices here are occurring against a peculiar international backdrop.
European natural gas futures, the benchmark price level for the EU and the rest of Europe, briefly fell into a negative position on Monday. They’re down 20% in the past week — and 70% from their highs in late August.
But what about the impact of Putin’s invasion of Ukraine?
Well, Europe’s plans to wean itself off Russian gas are working: Europe now has 94% of its winter gas needs covered (in the past five years at this point it’s averaged 87%). At least 88 LNG tankers — most from the US — are waiting to unload at the few gas terminals Europe has, or are sailing slowly to them to soak up time, or waiting to leave ports in the US and Middle East and sail for Europe. There’s so much gas that the European grid was briefly oversupplied — the reason why prices briefly went negative.
Mild autumnal weather across much of Europe is also helping, CNN quoted Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, pointing out “in countries like Italy, Spain, France, we’re seeing temperatures and [gas] consumption closer to August and early September [levels]. Even in countries in the Nordics, the UK and Germany, consumption is way below the average for this time of the year,” he added.
Crucially, the surge in supplies to Europe is not a one-off to replace Russian gas this year. Russian gas’ role in European energy supplies is finished. Putin thought he had a weapon to force Western acquiescence. Instead, he’s killed off a major support for a Russian crony capitalist economy that even before sanctions was ageing, sclerotic and riddled with corruption.
American — and to a lesser extent some Middle Eastern — suppliers have established themselves in Europe as major swing exporters of gas. for which they’re undoubtedly very grateful to Putin. Australia’s Woodside is also a growing supplier to stricken German gas giant Uniper.
Gas shipments need infrastructure, and the surge in shipments to Europe will see more receiving terminals and pipelines built or reoriented to Europe, and more export terminals built in the US. Within a couple of years, a US gas “pipeline” across the Atlantic will have been established that will make a return to Russian gas out of the question.
Many of the US gas cargoes have been diverted from Asia, but gas prices in northern Asia have also fallen sharply since the sudden surge in late August; they are down more than 40% compared to the last days of August. Like Europe, much of Asia is facing a warmer than usual winter — the product of La Niña in the Pacific, which will push the jet stream further south in North America and bring colder conditions to the mid-west and north-west, but drier, warmer conditions elsewhere.
But here, gas prices are set to go up, and up, and up: an average of $16 per gigajoule in 2023, from $8 per gigajoule, according to Australian Competition and Consumer Commission figures. Domestic buyers are being offered gas up to $25 per gigajoule.
If, as we’re always being told, gas prices here are dictated by the export prices for east-coast gas supplies, why isn’t the falling global price of gas showing up in current and future prices here?
“Here” being the eastern states, of course. Western Australia is a far away country of which we know nothing, with its incomprehensible policy of reserving some gas production for its citizens, and other bizarre practices like keeping control of its electricity grid.
We keep collectively asking ourselves “what power price rises?” over here. It’s genuinely weird to see the crisis over east and how much it was self imposed.
“Why isn’t the falling price of gas showing up here?” Simply because the producers don’t want it to, and like the gambling industry, the land/property market, and sundry other state captured enterprises, fossil fuels won’t allow such an outcome.
Yep we sold our sovereignty for zero to give these companies the pleasure profiteering we actually sponsored them with military and intelligence resources
Come on in you galahs
The infuriating nonsense of governments’ abdication of responsibility for governing by the cowardly deferral to the magic pudding of ‘market pricing’. When are governments going to start reforming the elements of neoliberal globalism that are toxic to society?
Market pricing only works when there is competition in the market. Competition without collusion. It is the federal government’s resposibility to prevent collusion. Ask Alborrison.
Surely cannot we regulate the Gas companies etc to sell their output first to the Australian market at cost plus 2% as a compulsory security acquistion? It is clear the Conservative opposition would oppose this because it is in their interests to be able castigate the Labor Government for high Gas prices, but it will also serve to show the Australian population good leadership and how mean the Opposition benchs really are!
Don’t forget Labor is also a beneficiary of fossil fuel donations. Don’t hold your breath waiting for any change in policy.
You saved my having to write that.
Greens and Teals where are you?
Cost plus 2%! No business will survive on that mark up.
Then leave and let someone who will take over.That’s what Labor said when they kept the 15% for domestic use and it took only days for a change of heart.
Whilst I think the previous Government was asleep at the wheel when the energy contacts were set, I see very little complaining when our Iron Ore prices, wheat and Coal prices reach record levels,
I love the way Bernard and the western media frame Russia as a sclerotic failed kleptocracy which thought it could beggar the EU with its gas weapon. Unlike that dynamic class ridden exemplar the UK LoL. Get a grip guys and stop rewriting history. The US/EU game plan was to wage all out economic war on Russia. They fully expected the Russian economy to tank under the pressure. Russia continued to supply gas even through the conflict. The Russian economy is weathering the storm. This is a stupid war caused by the US/EU. Just read Jeffrey Sachs and John Mearsheimer on this or Cameron Leckie an OZ army veteran. The basic industrial sector of the EU depends on low price Russian gas. Don’t believe me? Check out that left wing journal the FT says. LoL. It explicitly states this. Of course states can source gas from all over but it’s LNG and inherently dearer no matter how you cut it. As for OZ, tax the gas gougers and carve out our needs as well. Of course Labor is in the pockets of the gas gougers as well sadly. So expect very little. Read John Quiggin about what effect the complete closure of gas exports would have on our economy. Virtually undetectable.
There is no subterfuge or deception – the US has stated openly, clearly, loudly and often that their desired outcome is the destruction of Russia economically, as per Raygun’s “$pend them into the ground $trategy, and militarily using the Ukraine as a club.
The EU is helpless to do other than follow orders with Nord Stream 1 & 2 suddenly ‘decommissioned’.
Even France is screwed due to its 80% reliance on nukes for electricity which has become a poison chalice, generation is down 40% and still falling because the continuing drought has meant insufficient water for cooling.
Germany is working 25hrs a day, 8 days a week to build LNP terminals for any shipments the US deigns to sell them, with prices multiples starting at 5x.
Holland has plenty of North Sea gas just off their coast (which has buoyed its economy for the last 50yrs – known as the Dutch disease in economic terms – sic!) but has recently decreed, for dubious reasons not disclosed, that it can no longer be used in Amsterdam – “…the city is going “aardgas vrij” in the coming year. I’m still on gas, so my bill went from e.75p/m to e.98 this year and may go up to e.150 in the winter months ahead…” a family member there writes.
Ironically Britain has adequate supplies of North Sea but Rishi Rich has refused to act to ensure its availability depite their windfall profits – Churchill’s calm assurance during WWII about being “an island of coal in a sea of fish” is no longer true thanks to Thatcher shutting down the coal mines and the French having scoured the seabed shelf of everything edible since 1972.
Maybe Putin should have thought and consulted more before invading Ukraine? What credibility or expertise does Koch’s Mearsheimer, Rockefeller’s Sachs and the ADF’s Leckie have versus e.g. Edward Lucas and conga line of credible experts, academics and journalists?
What Putin has achieved for Europe etc. is further acceleration away from fossil fuels towards renewables, strengthened the resolve of UKraine and EU citizens, while Russians citizens of working age with the wherewithal are emigrating to wherever possible.
In future, if not already, Russian budgets will be impaired due to decline in revenue from fossil fuels which then leads to cuts in public services, their delivery to citizens, and stretches military budgets too; well done.