The great gas rip off: how the govt can stop us all getting burned

The gas industry has been trying to convince us all there is a gas shortage, but that's nonsense and it will no longer fly. Politicians from across the political spectrum now acknowledge that Australia has a gas export problem.

It is hard to understate what a complete disaster unlimited gas exports have been for Australian households and business.

Around 80 per cent of Australia's gas is used for export. In just the past five years, governments have allowed the export of enough gas to supply Australia for more than 20 years.

Since Australia began exporting gas in 2015, domestic gas prices have tripled, and electricity prices have doubled. The Opposition Leader, Sky News, and others like to blame renewables (more on that later), but excessive gas exports are the main reason wholesale electricity prices have doubled.

And what do Australians get in return for using 80 per cent of our gas for export? Apart from higher energy bills, we get bupkis. Peanuts. Chump change. Australia Institute research shows multinational gas export companies paid zero royalties on over half the gas they exported overseas.

In just four years, the Australian government gifted the big multinational gas companies $149 billion worth of LNG, for free. The government collects more money from HECS than from the main gas tax, the Petroleum Resource Rent Tax (PRRT). It's highway robbery. The federal government has been letting gas export companies get away with ripping off Australians for too long.

So, the news that the Albanese government may soon curb uncontrolled gas exports is as welcome as it is overdue. The government has accepted that gas exports are causing supply shortages and rising energy prices. It's harming the manufacturing industry. Capping gas exports in some way is what is required to start fixing the problem.

The only dangerous intervention would be if caps on exports, or a gas reservation policy, applied to new gas projects only, which would be useless. There is plenty of uncontracted gas that can be diverted to the domestic market right now.

The government is reportedly contemplating two options. The first option is to focus just on gas exporters, the true source of the problem. Restrictions would only apply to three big gas export projects in Queensland led by Origin, Shell, and Santos, requiring them to supply a certain amount of gas to the domestic market, and limiting the amount of gas they can take from the domestic market for export. This first option is more likely to reduce gas prices, and more likely to prevent shortages.

Option two could put some kind of supply obligation on all gas producers. This option would mainly benefit Santos, which cannot currently meet its export contracts without buying from the domestic market.

But restricting exports is only one part of the solution. The other part is taxing gas exports properly.

Australia is literally giving away tens of billions of dollars of gas royalty-free. The main gas tax, the PRRT, is broken. Federal Treasury has stated that "To date, not a single LNG project has paid any PRRT." There's no other way to say it, Australians are getting ripped off and the government is allowing it.

Economists say countries should tax the things they want less of and subsidise the things they want more of. Australia wants less gas (because it's a fossil fuel that causes climate change) and less gas exports specifically (because gas exports are driving up domestic gas and electricity prices). A tax on gas exports is just sensible economics.

It is a policy that is fast gaining political consensus. The Greens have long supported taxing fossil fuels, as do many independents on the crossbench. The ACTU has proposed a modest 25 per cent tax on gas exports. Even Peter Dutton announced during the election that the Coalition would incentivise gas export companies to keep more gas for the Australian market by putting a tax on gas exports.

The government would be sensible to take up the ACTU's proposal. A 25 per cent tax on all gas exports would end the gas "shortages" being engineered by the gas industry, cut domestic gas prices, and deliver $17 billion revenue windfall for Australian industry and households.

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But the main benefit of a 25 per cent gas export tax is that it is simple and hard to avoid. Various technocratic solutions to our gas woes, like the Australian Domestic Gas Security Mechanism, and Gas Code of Conduct, have comprehensively failed to fix the problem over the last decade. A tax on gas exports is a simple policy to explain and difficult for the gas exports industry to avoid. Win, win.

The good news is, renewable energy is the cheapest to build and cheaper to run. Once solar panels and wind turbines are installed, they are powered by the sun and wind for free.

The Coalition, Sky News and others desperately keep trying to blame renewables for energy price rises, but one in three Australian households now have solar panels on their roof. Together, they generate so much electricity the government's smart Solar Share scheme will force electricity retailers to offer Australians three hours of FREE electricity in the middle of the day. It's clever policy and clever politics, allowing all Australians to reap the benefits of cheap renewable energy, even if they can't afford a solar panel, or are renting.

Stopping the great gas rip off has been in the political too-hard basket for too long. The Albanese government would be smart to fix Australia's gas export problem by both restricting exports and taxing them. It will not only help the budget bottom line, it will make life easier for millions of households and businesses across Australia.