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The truth about the ‘gas crisis’

Journalist Jesse Noakes on eye watering energy bills and why the one state that’s avoiding them is not necessarily the example the rest of us should follow.
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There are power interruptions forecast around Australia and gas prices are skyrocketing.

But the strange thing about high gas bills arriving at Australian households is that we’re one of the biggest gas exporters worldwide. 

So why are we paying so much for it? Do we need even more gas? Or would that be learning the wrong lessons from this current crisis?

Today, journalist Jesse Noakes on eye watering energy bills and why the one state that’s avoiding them is not necessarily the example the rest of us should follow.

 

Guest: Contributor to The Saturday Paper, Jesse Noakes.

 
Read Transcript

[Theme Music Starts]

RUBY:
From Schwartz Media, I’m Ruby Jones, this is 7am

Australian gas prices are skyrocketing. In fact, they’re going up all over the world.

But the strange thing about high gas bills arriving at Australian households is that we’re one of the biggest gas producers worldwide. 

So why are we paying so much for it? Do we need even more gas? Or would that be learning the wrong lessons from this current crisis?

Today, journalist Jesse Noakes on eye watering energy bills and why the one state that’s avoiding them is not necessarily the example the rest of us should follow.

It’s Wednesday, June 15.

[Theme Music Ends]

RUBY:
Jesse, I want to talk to you about energy prices here in Australia, because as you know, they've gone up not just by a small amount, by a lot, by as much as 8,000% in some parts of Australia. And so I thought that maybe we could start by talking through what it is that we've been seeing because I mean, those numbers, they're pretty extraordinary.

JESSE:
They are definitely. That's right. I mean, over the past fortnight or so, we've seen wholesale gas prices soar across most of Australia. 

Archival Tape -- Reporter:
“Wholesale gas prices in Victoria are forecast to spike more than 50 times the normal levels.” 

Archival Tape -- Reporter:
“Some of the poorest Australians are bracing for bill shock this winter and the high prices may further fuel inflation.” 

JESSE:
The price in Victoria, for example, as you mentioned, surged up to 80 times its normal level during the extended cold snap that the East Coast has seen recently. 

It got to such a point that the Australian energy market operator, actually stepped in and kept prices at $40 a kilojoule in Melbourne and Sydney.

Archival Tape -- Reporter:
“The Australian energy market operator will impose a cap on gas markets across Sydney, Melbourne and Brisbane after wholesale prices soared 80 times the normal levels yesterday” 

JESSE:
That's still several times higher than it was just a few weeks ago. At least one gas retailer has already gone under because they can't pay the new wholesale prices. 

And most importantly, obviously for folks at home, there are concerns very reasonably so that people opening power bills in coming weeks and months are going to be in for a really steep increase in the cost of powering their homes. 

Archival Tape -- Jim Chalmers:
“This is unfortunately a perfect storm of conditions and challenges in our energy market.”

JESSE:
As a result, there have been calls for the government to do more. 

Previous government, Malcolm Turnbull's in 2017 created a trigger through which the Government can actually compel energy companies to stop exporting so much gas, to stop spending so much overseas. 

But the New Labour Government and New Energy Minister Chris Bowen don't seem to think that'll fix things any time soon. 

Archival Tape -- Chris Bowen:
“It's not an easy trigger to pull and if it was pulled today, it would have absolutely no impact until the 1st of January anyway”

JESSE:
They've said even if they pushed it today, the trigger wouldn't actually have any effect until the start of next year. 

Now the one exception to the crisis we're seeing across the country is my state, Western Australia. Prices in WA have actually stayed completely stable at around about $6 a gigajoule throughout. So I have seven or eight times lower than what the East Coast is saying at the moment. It just so happens not coincidence was also the only state that's got a legislated cap on gas to ensure that they've got sufficient domestic supply to meet the demand.

RUBY:
Hmm. Okay. I want to dig into that and really understand the mechanics of what's going on there and why away is so different to the rest of the country. But I think before we do that, it would be good to understand what forces are at play in terms of driving the price of gas up in Australia right now. What are the the underlying factors?

JESSE:
Yeah, so I think the most important thing to realise is that gas prices are not shooting through the roof because Australia doesn't have enough gas. That's simply not the case. We have more gas than we need, nor is this about a few coal fired power stations being out of action or a bit of cold weather on the East Coast. 

Australia's got heaps of gas, we just send most of it straight overseas. Australia is actually the largest single exporter of liquefied natural gas of LNG in the entire world. 

What this means most immediately is that we're intimately tied into global energy markets. So prices skyrocketing over here aren't just a function of local supply and demand. They're also wrapped up with increasing global demand as the world economy bounces back from the pandemic. But also more recently, of course, the war in the Ukraine has strangled supply of gas internationally because of the dominant role that Russia plays in global energy supplies and sanctions as a result of that conflict.

Umm I think locally the story is one of own goals and missed opportunities. In fact, earlier this week former WA premier Alan Carpenter, who I spoke to for this story, described what Australia has done in recent years as like walking into traffic, wearing a blindfold. Predictable consequences for a predictable failure of government policy. 

RUBY:
Mm hmm. Okay. Well, let's dig in to that, because it sounds like, from what you're saying, that we actually do have enough gas in Australia more than enough. But the problem is that we can't really use it ourselves, but because a lot of it is sold to these multinational companies and ends up in other parts of the world. But you said that WA was the exception. So what has happened there?

JESSE:
Well, WA is the only state that's done the obvious thing, which is to make sure that it keeps enough of its own gas for its own people rather than allowing, as you say, the big multinationals to make a killing, selling it off overseas before folks at home get a chance to use it. 

That's a result of a policy to ensure domestic gas supplies, a reservation policy instituted by a previous government, the Labour government under Alan Carpenter back in 2006, they ensured that 15% of WA gas was reserved for the domestic market for WA homes before the multinational companies got a chance to take it overseas to short term and spot markets over there, which is really where the action is all happening and what's driving up the cost of heating homes on the East Coast. 

The obvious solution, of course, is to keep the gas at home so we're not held hostage to international speculation and cartels. But as many people have said to me this week, the even better solution is to avoid the whole issue entirely by using better, cleaner, cheaper energy sources with an even more plentiful supply. And that's renewables. 

Archival Tape -- Alan Carpenter:
“The situation in Australia has been made dramatically worse by the complete stupidity of our energy policy over the last nine years.”

JESSE:
Alan Carpenter, the former premier, told me for this story for all the plaudits he's received recently, reasonably so for the gas reservation policy, the most important issue to remember is that gas is not the long term future at all, it's renewables.

Archival Tape -- Alan Carpenter:
“We've had ridiculous federal government policy, which is basically discouraged, if anything, discourage renewables. It's allowed this unfettered access to gas exports and so on.” 

JESSE:
And Carpenter is not the only one saying that. The CEO of the Australian Energy Regulator said the same thing last week, highlighting the economic benefits of a transition to low cost renewable energy.

The only trouble is that will require a bit of political will and investment. But when the rest of the country is paying at least $40 a gigajoule for their gas supply and was paying a fraction of that at five or $6 for the same supply, the domestic gas reservation policy really speaks for itself.

So, everyone across the board seems to realise that this isn't fundamentally about a shortage of gas. It's about middlemen fiddling with the supply side. The suggestion that the solution to the crisis is somehow to pump more gas is almost wilfully perverse. It's therefore a little ironic that the current Premier of Western Australia, Mark McGowan, is such an outspoken booster for the biggest new fossil fuel project in Australia, which is the Scarborough Gas Project just off the north west coast. 

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RUBY:
Jess, Let's talk about the Scarborough gas projects. As you say, it's the biggest new fossil fuel project in Australia. But can you just remind me about what is being proposed? 

JESSE:
Yeah, of course. So I mean, Scarborough is only one of more than 100 new fossil fuel projects in the pipeline post-election, 

Archival Tape -- Reporter:
“Woodside and its partner BHP Petroleum have approved the development of one of the nation's largest gas projects off the WA coast…” 

JESSE:
but it's definitely the one that's garnered the most attention since the election. 

Archival Tape -- Reporter:
“It's Australia's largest project of this kind in the last decade and it's being described by some environmental groups as Australia's biggest fossil fuel project”

JESSE:
And talking about a post-election pipeline pipeline is definitely the word when it comes to Scarborough to get the gas. Woodside, who are the energy company behind it, are going to have to pump out more than 400 kilometres from the Scarborough Gas Field off the coast of Western Australia through an undersea pipeline past a host of protected marine parks to get the gas to their Burrup Hub megaproject in the Pilbara region. Burrup Hub also just so happens to be in a UNESCO World Heritage nominated sacred site Marine Sugar, as it's called by traditional custodians. 

Once the gas gets the Burrup for processing and refining and shipped overseas primarily, of course it's projected to emit more than a billion tonnes of CO2 by 2050 and that is almost three times Australia's total annual emissions at the moment. So it's a big deal and it's a big project. 

It's therefore somewhat surprising that both state and federal Labour governments seem to be on a unity ticket in support of Scarborough. They've recently been almost outdoing each other to proclaim what a great idea it is. That's despite the fact it's going to significantly add to the mitigation burden that Federal Labour will need to meet their 43% emissions reduction target, which they took to the election and won.  

RUBY:
Hmm. And so why is it then that both the the State Labour government and Federal Labour government are in such lockstep on this in agreement that the Scope Project should be able to go ahead if it does threaten the targets that the government has set for itself in this way. 

JESSE:
Well, Superficially, there is a certain logic to the argument, f we can't get enough gas right now, you might say, surely we need more projects. And surely it makes sense to use the biggest pipeline available, which in this instance is Scarborough. The thing is, of course, that we're not actually short on gas at all, as everyone now recognises. 

I mean, I think previously the prevailing wisdom politically was that the economic benefits were seen as more important than the climate or cultural costs of these projects. The recent election might have given politicians pause for thought, though they seem to be behind public opinion on this one. 

Now, the coalition, who designed and guided most of the policies that led to this crisis on the East Coast right now, they were abandoned by voters in droves, of course. But what voters didn't do was flock to the Labour Party. The election was primarily a massive mandate for climate action with the climate independents and the Greens seeing a big uptick in their votes. The Greens are calling for a reconsideration of this project. Greens leader Adam Bandt told me this week that the Albanese government could stop Scarboro if it wanted to, and he said the Greens would support legislation to prevent new, all new coal and gas projects. He said that backing massive projects like Scarborough meant the new government isn't listening to what the public just said in the election. And I think based on the recent election, a majority of the public agrees with him on that one. 

RUBY:
But to what extent is the project now a done deal as it does have the support of the central government and the state government? 

JESSE:
Well, it depends who you speak to. 

Archival Tape -- Madeleine King:
“If Woodside prepared and they are pre pared and have guaranteed the WA State Government to implement the appropriate offsets for the development of the Scarborough gas field, then we support that because it absolutely fits within our ambitions for net zero emissions by 2050 as well.”

JESSE:
McGowan's recently said Scarborough has all the approvals it needs. Federal Resources Minister Madeleine King was out recently saying it has their absolute support. 

Archival Tape -- Madeleine King:
“The government will support energy developments and resource developments that meet environmental standards and approvals and also have a goal of making sure we go to a decarbonise world.” 

JESSE:
Woodside, the company behind Scarborough, are a little bit more refined. They say they have all primary approvals for the project, but they also say the execution is underway already. 

Others, though, have a different view, including some of the regulators for this project. So Bill Hare, the climate scientist and researcher, he told me he's convinced there's a legal and political avenue still open to opponents of the project, and most of that comes down to cultural heritage and ultimately the cultural authority who gets to speak for this country. 

Bill Hare reckons the big gap in the assessment is there's been no assessment of Aboriginal cultural heritage impacts and the head of clean transitions at Greenpeace just panegyric, said much the same thing. She reckons it's a mistake to think that Scarborough is a done deal and that at this point there are still several regulatory and legal avenues available for stopping it. 

So there's certainly still questions remaining over the project, at least the offshore parts of it. And a lot of those seem to come back to the impacts on the environment specifically and especially the cultural environment which involves protected marine parks, migratory path, the whales off the coast and then once the gas gets to the coast on Maroochydore itself, the oldest, largest and very sacred marine sugar Rock art site, home to more than a million petroglyphs, which we've spoken about previously, and a very sacred site for stories and songlines for traditional custodians, more and more of whom are speaking out against the project. 

RUBY:
Hmm. And just to come back to the current situation, you're also saying, I suppose, that to see the establishment of any new gas project, a project like Scarborough as the solution to the energy crisis at the moment is to misread the situation.

Right ok. And Jesse, just reflecting on the current situation, on the quote unquote gas shortage and the rising prices we’re seeing in Australia. There would be some I suppose that would say that a solution to that crisis is to support the establishment of new gas projects - would that be misreading the situation though? 

JESSE:
Yeah, I think that's right. I mean, in the short term, it probably makes proponents of the project sleep a little easier at night. It gives them an easy out when critics attack the climate cost of big fossil fuel projects like this. 

But it's short term thinking like that fundamentally, that got us into this mess, and it's really unlikely that the same short term thinking is going to get us out of it. 

I think the reality, based on what most people I've spoken to have agreed this week, is that if we just keep chucking gas on the binfire of Australian energy policy, which is what the Energy Minister Chris Bowen called it this week, referring to the Coalition's last decade in power. If we just keep pouring gas on the flames of that, we'll be back here again in a few years' time. 

Meanwhile, the planet's going to keep heating up. Weather is going to keep getting more extreme. Geopolitics will get more uncertain and fractious. And all the preconditions globally that led to this mess in the first place are only going to get worse. 

So for a project like Scarborough, it's probably worth listening to traditional custodians who have told me very clearly that they don't think it's a problem just for them and for their cultural heritage. They say it's a problem for all of us to grapple with and think about how we're going to respond to it. 

And ultimately, I think that former Senator Scott Ludlam said it best on this one. Ludlam told me that if the answer to the gas crisis on the East Coast is more oil and gas, then we fundamentally misunderstood the question. And I think that about sums it up really when push comes to shove.

RUBY:
Mm. Jesse, thank you so much for your time.

JESSE:
No worries. Thanks so much, Ruby. Appreciate it.

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RUBY:
Also in the news today

​The Socceroos will go to a fifth straight world cup after beating Peru on penalties. Substitute goalkeeper Andrew Redmayne was a reluctant hero after being brought on moments before the end of extra time and making the winning penalty shootout save.

The World Cup will begin in November this year in Qatar.

and

 

The Australian Electoral Commission has announced the count for senators in the Northern Territory has concluded, with Labor’s Malarndirri McCarthy and the Country Liberals’ Jacinta Nampijinpa Price successfully voted into the Senate.

 

The AEC also announced former Rugby Union player and climate independent David Pocock has beaten the Liberal Party’s Zed Seselja for the final senate place in the ACT.

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