<\/p>\n
Enter One Nation<\/p>\n
So far, the answer is \u201cno\u201d. The local gas price has diverged from the global price \u2013 as Asian prices have soared to $30 per gigajoule (Gj), the local gas price has fallen to $9Gj. <\/p>\n
The main reason is the shift in political attitudes towards the East Coast gas cartel following the shock of the Ukrainian War. <\/p>\n
Because utility bills comprised such a large component of falling living standards, households have become much more aware of the role of the cartel, and much more unhappy about the government refusing to intervene to stop it. <\/p>\n
Polls today suggest more than 80 per cent of Australians support heavy-handed intervention, which is the kind of agreement you don\u2019t even get on the question of whether the earth is round. <\/p>\n
Perhaps the most obvious political symptom of this is the rise of One Nation, which has fought for anti-gas cartel measures. <\/p>\n
The East Coast LNG export cartel knows it is living on borrowed political time<\/a>. <\/p>\n A change of strategy<\/p>\n Since the Iran War began, global prices have soared while local prices have fallen. The cartel controls more than 90 per cent of reserves, so it can move prices any way it wishes by opening or closing the local supply spigot. <\/p>\n It has clearly chosen to protect Australia from the global shock this time around. <\/p>\n However, this is not free. In return for keeping local gas prices stable, various members of the gas cartel have argued that Australia must not apply a super-profits tax upon it during the Iran war. <\/p>\n Such a tax has been under hot debate in Canberra, with a 25 per cent export levy supported by many fringe parties and mulled by the Albanese government. <\/p>\n This would collect $17 billion and upwards of war profits.<\/p>\n The LNG export cartel is threatening blue murder<\/a>. <\/p>\n The wrong tax <\/p>\n The problem is this. Such a tax does nothing to prevent the gas cartel from raising local prices. <\/p>\n Indeed, if they are taxed on war profits, as they should be, the cartel is very likely to revert to the last war and let the local price of gas rise to Asian export parity (minus the 25 per cent export levy). <\/p>\n This will rerun the inflation shock of the Ukraine war, and much of the collected tax revenue will simply have to be recycled into bill subsidies. We may avoid the inflation shock, but we won\u2019t gain any net tax.<\/p>\n A better tax<\/p>\n A much better way to do this is to change the structure of the export levy from 25 per cent of profits from LNG to taking 100 per cent of revenues above a set threshold price. <\/p>\n An export levy of 100 per cent automatically makes the threshold price the local price, while the amount of tax collected increases significantly.<\/p>\n For instance, a $7Gj threshold price would still yield more than a 20 per cent return to East Coast gas producers while delivering to the Treasury scores of billions of dollars. <\/p>\n This would also reduce electricity prices as gas prices fell further. <\/p>\n Even a threshold price of $10Gj, which is exorbitant for the LNG cartel given it produces gas at all-in costs of $4-5Gj and around $1Gj on a cash basis, would have the same outcome. A fixed gas price at home of $10Gj would keep power bills stable while still collecting billions<\/a> for the Treasury. <\/p>\n Threats<\/p>\n The cartel will threaten an investment and production strike. But it won\u2019t do it. <\/p>\n In fact, it will do quite the opposite, seeking to maximise volume over margin to cash in on the threshold price. <\/p>\n Australia has let a vicious gas cartel destroy living standards for over a decade. <\/p>\n Time to break it.<\/p>\n