Take your seats, ladies and gentlemen, for Australia’s annual gas pantomime, guaranteed to scare the wits out of struggling consumers.
Every year it’s the same tired script, where the villain is cast as the hero, and crisis is averted in the nick of time. Hurrah! The heating stayed on for another winter. Standing ovation.
Frack that
On Thursday, the Australian Energy Market Operator (AEMO) releases its annual gas statement of opportunities, GSOO as it’s affectionately known. Cue scary headlines and claims of a looming “gas shortage” and a “catastrophic supply shortfall” unless we let the gas cartel unleash more fracking and mining of the fossil fuel.
For media companies, GSOO is manna from heaven — almost guaranteed to deliver a “warning” that, framed a certain way, can scare the bejesus out of people and pull in a big audience. For the gas industry, it’s an opportunity to demand more and more gas expansion and to castigate any government concerned about climate change and the environment.
Nothing short of bull
As Public Enemy sang, don’t believe the hype. There is no gas shortage. Australia has an abundance of gas. It is the third largest exporter of liquified natural gas in the world. Each year, giant gas companies ship offshore far more of the fuel than Australian businesses and households could possibly use. The gas industry uses more of it to liquify the gas for export than Australia’s entire manufacturing industry consumes.
To the extent that it does exist, any risk of a shortfall in Australia is only a misallocation of resources, given that so much of Australia’s gas (up to 80%) is exported. It could easily be addressed by requiring gas companies to reserve enough to meet domestic demand before they sell it offshore.
The other thing to keep in mind is that when it comes to the “gas shortfall”, AEMO is a bit like the boy who cried wolf. The “risk” that it talks about is a worst-case scenario: freezing winter weather coinciding with extreme peak demand for gas-fired power. Even then there are better ways to manage it than cutting the heating and the lights.
One day a shortfall may happen, maybe even this winter, but AEMO habitually overestimates demand and has a track record of forecasting risks of a shortfall that doesn’t happen. Analysts have questioned the demand assumptions built into the modelling AEMO relies on — not that you’d know that from most of the reports in the Murdoch press or the Nine media.
Hairy headlines
AEMO is not simply a government-controlled agency. While federal and state governments are represented, most of its members are energy companies, including gas companies like Santos, Origin and AGL. The gas industry’s membership is rarely if ever mentioned in media coverage of the GSOO.
In a new study, The Australia Institute has analysed media coverage of last year’s gas statement. You get a sense of who’s who in the GSOO, so to speak, by looking at which voices are privileged in the media reports.
The study uses a “scare scale” to rank media coverage based on the ratio of scaremongering words — including “fear”, “crisis” and “catastrophe” — in each report. No prizes for guessing that the Murdoch media, a tireless barracker for fossil-fuel interests, dominates the list. It produced six of the top 10 articles on the “scare scale”. Nine was right up there, rounding out the list with four of the top 10.
Dig, baby, dig
Outside the major commercial media outlets, coverage was more nuanced and balanced. The ABC ran with the scary headline and lead paragraphs but also spoke to analysts critical of AEMO’s report and its tendency to overstate risks and demand for gas. Reporting in Guardian Australia and RenewEconomy was balanced and appropriately sceptical.
Gas industry executives and lobbyists got prominent coverage in the major commercial outlets — an opportunity to demand more and more gas exploration and exploitation. Climate policy advocates, energy analysts, consumer interest groups and environmentalists featured far less, if at all. Alternatives such as curtailing exports to ensure domestic supply were scorned by gas industry bosses. Yet it is one of many ways to address potential risk.
Mind the store
Australia could upgrade pipelines used to shift gas from the north of Australia to markets in southern Australia. It could require gas companies to shift more gas when pipelines are not being fully used and build storage facilities for this gas. Australia could increase the pace of electrification so the nation is less reliant on the climate-polluting fossil fuel. It could reward industrial users and households that cut back gas consumption at peak times.
Government could finance the installation of “smart technologies” that allow gas suppliers, or utilities burning gas to create electricity, to turn off appliances for short periods when demand is very high, under voluntary contracts which provide energy bill rebates to customers who agree to do this.
The GSOO, in fact, advocates many of these measures. But again, you might not know it watching the annual gas pantomime: full of sound and fury — and a lot of hot air.
Stephen Long is a former ABC investigative journalist covering business and finance and now a senior fellow at The Australia Institute.
I guess the fundamental question is how is it that the major gas extraction interests are represented in AEMO. Under this structure would it not be inevitable that these representatives would press the case for the need for more gas supply?
Talk about Dracula being in charge of the blood bank!
Additionally, my understanding is that the gas companies are already subject to a “reservation” regulation pursuant to which they are required to hold from export sufficient gas for domestic demand. Is this not the case?
Only in WA !
I know that in WA the gas industry have to reserve enough gas for WA citizens. But it’s not so in eastern states. Why?
Politicians are rewarded for subservience to vested interests. Until we punish them, nothing will change.
If we want a better deal, vote them out.
Career politicians are inevitably corrupt. That’s the system the elite use to remain in control. Donate to ‘both sides of politics’, and they’re guaranteed access. Donate a lot, and the Parties will not say “No.” The Zionists figured that out. Now they control the West.
Tough luck, Palestinians.
Ukrainians.
The powerless poor.
Yankee go home.
What royalties Gas extraction companies pay? Since it is “our” gas being extracted what conditions do our government put on the extractors? Why do we not have hybrid solar generators situated on “our” gas fields producing baseload electricity?
Hi Dick, unlike in WA, there is no formal gas reservation policy for the east coast/national energy market.
There is the Australian Domestic Gas Security Mechanism (ADGSM) but this is intended and described as a “measure of last resort” – emergency safeguard government shows no willingness to use, with holes in it big enough to drive a Mac truck through.
It’s noteworthy that AEMO’s warnings of potential shortfalls don’t seem to trigger it or prevent the big gas companies from selling as much as they like offshore.
Agree that we need to regulate a gas reservation mechanism for east coast gas and cap domestic prices. The absurdity of Australia importing gas beggars belief.
I sense the Australian community has a poor grasp the gas swindle we’re subjected to by the East Coast Gas Cartel. We’re being hoodwinked by the gas companies, certain media and our feckless politicians in Labor and Coalition.
Any decent politician with a backbone could win an election in a heartbeat by announcing that immediately there will be a reserve carved out of the gas companies supply. No if but or maybe. If it costs money to break the contracts then explain who is the blame in history and that a particular govt screwed it up. Well in a million years the Libs couldn’t do this to their mates, but Labor could but they are scared shitless of the Mineral Council mounting a campaign against them. Do it anyway as the whole country would be behind the modeling of the reduction of energy costs to business and consumers
Can voters insist the Labor party enforce the ADGSM to insist ‘(by LEGISLATION ) be instigated that gas companies must be forced to save all the gas required for domestic use as seems to be the case in WA.
Why doesn’t our government make the gas companies keep ample gas in Australia. Its only fair especially considering we subsidise these industries and they don’t pay enough tax, and we tax payers actually own the resources.???????
This power scare occurs every year and I’m sick of politicians using it to scare the wits out of everyone in order to improve their chance of being elected this year. And this is just the beginning, wait until the election is announced. I know scare tactics work just look at what happened during the referendum. That was a doozy of a scare as does anything about health down down the gurgler. Please everyone calm down. There is no war with China, we have to uncouple ourselves from the US because the so called “peace” president is on a rampage. Sit tight put solar on your roof, read a book, do anything but allow the idiots of the two major parties to frighten us with their usual nonsense. Try voting for Independents this time around, they make a lot of sense to me.
And we don’t even earn much from the huge amounts of LNG that we allow mostly foreign-owned and minimally tax-paying companied to export, without even guaranteeing that enough will be reserved/available for domestic use! This is Trump-level insane.
Both the Neolaboral Political Party and the Neoliberal (Hayekian-Friedmanite) Political Party are, quite simply, corrupt and are selling us out for donations.
Vote for Greens and community independents and hope we end up with a hung parliament.
Quoting from Stephen’s article: “The gas industry uses more [gas] to liquify the gas for export than Australia’s entire manufacturing industry consumes.”
Wow !! Now that’s worth remembering when friends/rellies talk about the need to increase gas exploration.
Thanks Stephen for listing practical options – upgrading the pipes from Queensland, increasing storage in southern states – we never hear about these! I’d much rather spend a bit to subsidise these than approve more gas.
As someone who has worked in investment finance for a big corporate: there is no way a government will impose gas reservation on the east coast. Australia has a reputation as a trustworthy law abiding place to invest. Anyone looking to invest in Australia in future wants to know they can do reliable sums. If we change the rules after a big investment decision then business is disinclined to invest – all kinds of business, not just resources companies. And all investors even our super funds.
People throw around the word sovereign risk, that’s what it means.
Then clearly the rules to protect the Australian consumers who own the resource, should be established BEFORE the investment and sales contracts are made.
Yes exactly! I’m WA we did this for gas. We have be be tough up front, for all resource extraction. Higher royalties for minerals too.