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Gas supplies secured. Prices to halve. Problem solved.
That's the message Prime Minister Malcolm Turnbull has hammered home after his extraordinary intervention in the tragedy that is Australia's energy export industry.
To an extent, it's a legitimate call. But when it comes to price, the real question is: half of what?
The bad news is, even after this intervention Australians forever will be paying global export prices for the abundant supplies of gas that once fuelled our manufacturing industries and heated our homes.
Unfortunately that is around three times the price we were paying before the three white elephant export terminals shipping Australian gas to Asia came on stream in the past 18 months.
Don't be fooled that this solution will result in "affordable" gas forever more.
Should oil prices spike at any time — and there have been plenty of examples of that in the past 40 years — domestic gas prices will follow suit.
But at least the ludicrous situation that has existed in the past year, where Australians have been paying far more for Australian gas than Japanese and Korean buyers, could be rectified.
The debacle that is the Australian gas industry is breath-taking.
Close to $100 billion was spent building three export terminals on Curtis Island off Gladstone in Queensland. Contracts were written to supply vast amounts of Australian gas at global prices, which then were about four to five times the domestic price.
Approved during the Rudd and Gillard years, no-one bothered to think through the ramifications on local business or households.
Unlike Western Australia, which has a gas reservation policy, no-one at a federal or east coast state level put in place safeguards to ensure Australians had access to adequate supplies.
Gas prices for manufacturers have soared
What has happened since is that Australia — on track to become the world's biggest exporter by 2021 — has flooded Asia with Australian gas.
That's caused global prices to fall and turned the three terminals into loss-making business ventures, resulting in multi-billion-dollar write-off.
The problems arose when the gas companies promised to export vast amounts of gas they knew was there, but hadn't actually got their hands on.
It turned out some was more difficult to extract than first seemed.
Then, a backlash in Victorian and NSW regional areas over environmental concerns saw farmers pitted against gas companies. The state governments locked up supplies.
The end result? There wasn't enough gas to fulfil the export contracts.
So the exporters began plundering local supplies, sending local prices soaring. But there was so much gas going offshore, regional prices fell and the exporters were losing money.
The pain has been felt most acutely by local manufacturers. Historically, they've paid around $3 a gigajoule for their gas contracts.
But in 2015, prices began to rise. By December last year, they were offered contracts at $12 a gigajoule. Then, by February this year, the price had jacked to $20 a gigajoule.
As this crisis has unfolded, the gas industry and quite a few politicians have argued the problem could only be solved by unfettered expansion, by opening up the gas fields and increasing supplies.
It's an argument that ignores the rights of those living in rural and regional areas. And it's an argument devoid of logic.
The rapid expansion in the export industry created the problem, not a shortage of supply.
And while the Turnbull Government's solution may alleviate some of the problems around price, it has forever locked Australians into paying global prices for an abundant natural resource that could have helped fuel domestic industry.
Topics: economic-trends, globalisation---economy, oil-and-gas, australia
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