‘War Profiteering’ Australian Gas Companies Are Loving the Global Energy Crisis

Australian gas companies have consumers bent over the barrel, experts say. The companies find themselves at the foot of a profit cyclone, where Russia’s invasion of Ukraine, and a domestic supply shortage have propped up companies that should have been abandoned long ago. 

Now, experts are begging the government to do something about it.

The wholesale cost of energy in Australia just last month clocked an increase of 141 percent over the last year. A couple of weeks later, Australia’s market operator was forced to intervene and introduce a price cap in Victoria, after the state saw gas prices soar higher than 50 times above normal levels. Only a couple of days earlier, the market operator was forced to make the same moves in Sydney and Melbourne.

Australian gas companies, meanwhile, are making a boon through the turmoil. For instance, Santos—Australia’s second-largest ASX-listed energy company by market capitalisation—saw its share price rise 1.8 percent at the beginning of the week, as the price of crude oil rose along with the world’s sheer desperation for energy resources.

It’s an issue that has seen newly-elected Australian prime minister, Anthony Albanese, find himself beneath the weight of mounting pressure.

Allegra Spender, a newly-elected independent MP who put climate change at the centre of her election policy platform, told the Today Show on Thursday morning that the government should turn the screw on the nation’s gas exporters to put domestic supply before their own profits. After all, she said, “you’re not paying a lot of corporate tax”, and making “great profits” anyway.

It’s true. A handful of Australia’s biggest miners—including Santos—have paid precisely zero income tax for most of the past decade. Mark Ogge, a principal adviser on climate and energy at the think tank, The Australia Institute, told VICE the fact that so many of these companies currently get away with paying little to no tax only bolsters the argument for taking an axe to their windfall profits and returning that money to everyday Australians.

But so far, calls for a windfall tax have fallen on deaf ears in government. 

Earlier this week, Australia’s newly minted energy minister, Chris Bowen, emerged from “crisis” talks with his state counterparts with a simple message: there is “no silver bullet, no magic answers” to the rising energy prices that are crippling Australian households.

Instead, he said, they had agreed in principle to 11 measures to dampen the local impacts of a sweeping, global energy crisis, including new powers to store gas reserves for use in the event of a national shortage and a “National Transition Plan” away from fossil fuels.

But neither of these measures will do much to curb the immediate stress being felt by households around the country—and none considers the degree to which gas companies should be held accountable for the massive price hike.

And Ogge thinks that Australia has a serious gas problem solved by none of Bowen’s new measures. Instead, he again suggested the government should consider introducing a cut-throat 80 percent windfall profits tax, to stop gas companies from “profiteering” while Australians are distressed.

“Every extra dollar that Australians pay [throughout this energy crisis] is going straight to the gas companies,” Ogge said. “They aren’t doing anything different, they’re just making a lot more money for every unit of gas they sell. So they’re making massive windfall profits.

“We need a tax-based solution where we take those windfall profits and compensate consumers, and then work on the medium to longer-term goals, which is to reduce our gas dependence, because otherwise this will always just keep happening.”

The Australian energy market was only recently exposed to the volatility of the global market. Once Australia opened up its gas exports globally, coal and gas prices locally became pegged to those around the world, and if local gas supplies are exhausted, domestic buyers have to go to the global market for gas—and pay the same international prices as everyone else.

In the thick of a global energy crunch, which has seen all of Europe try and wean itself off Russian coal and gas, the competition is vast, and prices are high, leaving Australians—among the largest exporters of gas in the world—subject to some of the highest gas prices. 

For Australian gas companies, war pays—and they haven’t shown signs of weaning themselves off the profits.

“They are making windfall profits as a result of our exposure to global gas prices, [a position] that they have deliberately engineered to enable them to profit off situations like this,” Ogge said.

“Every extra dollar, whether it's from an international company, or from Australian manufacturers, or from Australian households that is paid for Australian gas goes to them. I think it's war profiteering.”

Now, Australians are bracing for another shock, which could see prices for 2022 and 2023 rise by 18.3 percent in NSW, and 12.6 percent in Queensland, while driving prices up for businesses by as much as 10 percent. Beyond the new measures agreed to by the nation’s energy ministers, there are other levers the government could pull to curb some of that increase. 

One of them is the “Australian Domestic Gas Reservation Mechanism”, which would force gas companies to inject some of their supply into the local market. But the government has been quiet about whether it will pull the trigger, given how much energy it devoted to convince the resources sector that a Labor government was a friend to coal and gas.

For Eytan Lenko, a clean tech investor and former chair of the Australian think tank Beyond Zero Emissions, the ultimate solution is one that Bowen committed to on Wednesday: a transition away from coal and gas. He told VICE that he’s feeling pretty optimistic about it. 

It’s just a shame, he said, that it’s the companies who have spent so long rallying against a clean transition who are now benefiting from a crippling cost of living crisis. Instead, they could be offsetting it—and expediting Australia’s transition away from gas to cheap renewable energy.

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