As fuel prices rise, it’s the phrase of the month, but is the government’s use of the fabled ‘gas trigger’ the key to keeping prices in check?
Unfortunately not, because, despite seeming like an immediate cry to action, it’s actually a slow-moving reaction to an imminent catastrophe, and will likely arrive too late to help hard-pressed customers whose fuel bills will double in price next month.
The Australian Domestic Gas Security Mechanism is the official term for the gas trigger, and it’s almost as long as the process itself.
Pulling the trigger now will, at best, delay the discharge of more gas into the network until January 1, 2023.
‘The ADGSM is ineffective in this case,’ says the author. Gas Institute of Australia
In actuality, it means that a long series of meetings between government officials and the gas business will be held to establish the market’s path.
Both parties must be convinced that there will be a gas shortage for consumers across the country for the entire calendar year.
More gas would be let into the system under the mechanism only after a series of bureaucratic hoops and jumps – and the valves wouldn’t open until 2023.
The Coalition administration implemented the mechanism in 2017 with the goal of safeguarding Australia’s supplies.
The immediate crisis caused by Russia’s invasion of Ukraine, compounded with other variables, has shown the trigger’s flaws.
But Mr Ogge said the process undermined its effectiveness and it could be derailed by token gestures from gas providers.
‘It’s incapable of dealing with this crisis,’ he said. ‘It needs to be changed.’
David Littleproud, the Nationals’ leader, also agreed that the trigger would not assist in the short term.
‘I don’t think it’ll have any effect if it doesn’t take effect until January 1 – that’s a long time away,’ he added.
‘For many people in eastern Australia, that will be a lengthy winter.’
He criticized the newly-elected Labor government for not ‘raising the phone’ to gas providers to get more supply in the meanwhile, a claim rejected by Madeleine King, the newly-appointed energy minister.
The fuel sector, on the other hand, claims that gas is currently saving the country and that it should not be blamed for the price hikes.
‘Gas price increases are not driven by gas exports or deficits,’ says the report. Acting on behalf of the Australian Petroleum Production and Exploration Association
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Coal prices have soared, and there have been outages at a number of coal-fired power plants, driving up electricity rates and driving up demand for gas to fuel gas-fired power generators that were unexpectedly brought online.
‘International shocks, decreased renewables power generation, and higher coal prices are all keeping the lights on.’
‘Domestic supply is stable and close to record highs.’ For residential clients, there is ample gas.’
‘That is entirely incorrect,’ Mr Ogge claimed. No one, except the gas business, would argue that gas exports aren’t driving up prices.
The fuel sector claims that gas is currently saving the country and that it should not be blamed for price hikes.
‘We’ve tripled our gas production, but we’re exporting it, so if you want to buy additional gas for east coast consumers, you’re effectively competing against the export price.’
“Because Ukraine has pushed gas prices up worldwide, producers can tell domestic customers, “I could sell it to you at a reasonable price – or I could sell it to Japan at the current market price.”
The administration of Anthony Albanese indicated on Monday that it was willing to subsidize rising fuel prices with large cash payments to offset costs that could quadruple next month.
Mr. Ogge, on the other hand, believes the government should take action.
But he also recommended a windfall tax on the gas giants reaping huge unexpected profits from the global crisis.
‘We can raise billions of dollars and we can distribute it amongst people who who have been impacted by the price rises,’ he said.
‘It’s it’s the only fair way to do it, because it won’t increase the budget deficit this way – whereas a government grant to consumers will.
‘Instead of it being put on your gas bill, you’re just going to be paying it through your tax.
‘Whereas it should be the companies who are causing this and making windfall profits out of it which should be compensating people.’