The Albanese government has just put a band-aid on the domestic gas shortage crisis instead of announcing policies that actually encourage the vital industry’s growth in Australia.
Last week, in the middle of a very public political battle in Canberra over the Albanese government’s plan to control the internet, Chris Bowen quietly made an announcement on the government’s solution to Australia’s persistent gas shortage crisis.
Unfortunately, what was announced left a lot to be desired, akin to putting a band-aid on a gaping wound.
Instead of announcing a wide-ranging policy agenda which deregulates and encourages the gas industry to increase investment in Australia, the Albanese government is instead tinkering around the edges, promising a gas reservation scheme of up to 20 per cent for gas exporters.
This came just before One Nation announced that they are abandoning their own gas reservation policy.
While mandating that future gas contracts must reserve gas for domestic use in Australia is not a bad idea in a vacuum, it does nothing to fix structurally what is actually causing gas shortages in the first place.
It also does nothing to address the much larger sovereign capability crisis facing Australia, of which gas shortages are just a part, and puts future private investment at risk.
Sovereign capability refers to a nation’s self-sufficiency in key sectors like energy, food, industry, and defence.
It reflects the reality that supply chain stability, whether global or regional, cannot always be guaranteed.
This has become obvious this year with the war in Iran.
This vulnerability in sovereign capability has been headlined by fuel insecurity, but gas shortages have been a long-term issue for the Albanese government, in particular since the price shocks in 2022 brought about by the Russian invasion of Ukraine.
While no reasonable person would blame the Albanese government for wars initiated by foreign countries, we as a nation have decided to put ourselves at the mercy of global supply chains, despite the wealth of resources at our disposal.
The promise of a gas reservation policy is a recognition by the government that there is a need for greater sovereign capability but is a suboptimal path to achieving what is required.
As a basic starting point, the number of delays that occur to gas projects due to lengthy approval processes, activist lawfare, and increasingly strict net zero policies means that the number of new gas projects that can reserve gas for the future is less than the government might indicate.
A gas reservation policy is potentially useless while these barriers remain in place.
Unfortunately, these barriers are ideological positions taken by the Albanese government, most clearly of which is the firm commitment to the policy of net zero.
Net zero is a direct threat to the industries which support our sovereign capability, including gas.
This is because emission reduction targets can only be met by scaling down or shuttering projects in emission-intensive industries, the very industries which provide the critical goods we need to survive.
These sectors of the economy have been under constant threat since the election of this government in May 2022.
The implementation of the Safeguard Mechanism will impose a carbon tax of up to $11.7 billion to 2030, while government funded activist lawfare by groups such as the Environmental Defenders Office, and the introduction of an expensive and duplicative National Environmental Protection Agency, all present a risk to Australia’s gas security and sovereign capability more broadly.
All these factors have also contributed to a lack of private investment in the economy, with private investment and net exports as a share of GDP falling from 28 to 20 per cent since 2000.
Adding a reservation policy on gas, one of the few industries that still has investment potential in Australia, without abolishing and repealing the policies above will only make investment opportunities more problematic.
A common criticism of a gas reservation policy is that it deprives gas producers of opportunities on the lucrative export market.
This is true, but the sheer amount of gas resources available to extract – 220 trillion cubic feet – should make this a moot point.
There is more than enough for domestic use and international trade without a domestic reservation policy, just so long as the policies are in place to make it possible to extract the gas in the first place.
It should be a practical impossibility for Australia, in any circumstance given our resources, to experience a gas shortage.
If we are to adopt a national gas reserve, that should only happen after the removal of the red and green tape that prevent gas projects from occurring in the first place.
