Russia’s ongoing war on Ukraine has proven lucrative for Australia’s “cartel-like” gas companies, which have pocketed close to $40 billion in profits over the last year while Australian households have paid “extortionate” prices for local resources.
Now, experts are calling on the Australian government to introduce a windfall tax that could solve Australia’s recent gas supply struggles, and fully fund the government’s climate policy in just one year—with plenty of change to spare.
Before it invaded Ukraine, Russia supplied roughly 8 percent of the world with gas. After Russian President, Vladimir Putin, launched his assault, much of the western world slapped tariffs on the country, leaving swathes of the world’s leading economies with a huge energy shortage.
Australian gas companies leaped at the opportunity to fill the gap, and have since been making a boon through the turmoil.
After Russia launched its invasion of Ukraine in February this year, Australian gas prices more than doubled, and over the next 12 months, they’re expected to rise further still. The price jump has in turn seen the value of the gas Australian companies export increase from about $30.5 billion through 2021, to $70.2 billion through 2022.
During that period, according to new analysis from the Australia Institute, the amount of gas that gas companies based in Australia were shipping off to other countries remained about the same, and so did the cost of doing business.
Richard Denniss, executive director at the Australia Institute, said Australia’s gas companies are “essentially profiteering” from the war in Ukraine.
“Gas companies are making windfall profits selling the same amount of gas to the same customers with virtually no increase in their costs,” Dr Denniss said.
“The Australian people are paying too much for their own gas at home and not getting a fair share of the returns from the gas we export overseas,” he said.
It’s a recurring theme that saw the Albanese government first begin to find itself beneath mounting pressure in June this year, when the wholesale cost of energy clocked a 141 percent increase over the previous year.
Only a couple of weeks later, the market operator was forced to intervene and introduce price caps in Sydney and Melbourne, after gas prices, in some cases, soared higher than 50 times above normal levels.
Experts suggest that a windfall profits tax could help solve Australia’s domestic supply problems, and “extortionate” prices, by making it less attractive for gas companies operating locally to export overseas. The tax, which is already active in the United Kingdom, isn’t a radical idea.
So far, its supporters include former Treasury Secretary Dr Ken Henry, Nobel Prize-winning economist Joseph Stiglitz, and Atlassian co-founder Mike Cannon Brooks. The Albanese government, however, has so far swatted away all calls for a windfall tax ahead of its first budget, which will be handed down in little over a week.
In the face of more than $1 trillion in debt, treasurer Jim Chalmers faces serious revenue issues, many of which could be solved by a cut-throat 80 percent windfall profits tax.
It could give weight to government promises made on integrity, on making multinationals “pay their fair share” of tax, on delivering robust climate change policy, and on easing cost of living pressures for average workers. Mark Ogge, a principal adviser on climate and energy at the think tank, the Australia Institute, told VICE the government may simply be fearful.
“[Major windfall profits are] actually a huge net negative for the Australian economy because [they’re] driving up energy costs for all Australians. The gas expansion on the east coast, in particular, has been an economic disaster for Australia,” Ogge said.
“And then we have an opportunity to actually claw back some value for the Australian community, and the Australian government just lets it go, seemingly because they’re either beholden to the gas industry, or scared of them.”
The government’s approach to the industry has started to reveal cracks within the Labor party. Earlier this month, industry minister Ed Husic took a hardened position on gas companies operating in Australia, who he said should decide whether they’re “part of team Australia” or “team greed”.
Husic’s position is squarely at odds with the government’s federal resources minister, Madeleine King, who brokered a deal with gas companies last month, which in effect offered itself as a handshake deal where the heads of gas companies promised to offer all available supply to Australian customers before shipping it off overseas.
At the time, King promised that the deal would see gas prices fall. But they didn’t, and Australian customers continue to face the same prices as other customers, all around the world.
In response to questions from VICE, a spokesperson for King couldn’t be drawn on whether she would support a windfall profits tax, but insisted that “ensuring multinationals pay their fair share of tax in Australia” remains a priority for the government.
Analysis conducted in May this year found that only four of the Australian Petroleum Production and Exploration Association’s five members paid any tax on combined income of close to $140 billion between 2014 and 2020. The income reported by these companies is only expected to increase over the next 12 months.
Ogge said the industry’s “disproportionate” influence on the government flies in the face of “its commitments” to tackle multinational tax avoidance, climate change, and various other election promises that proved central to its platform, all while opening more gas projects refusing to intervene in mega profits.
“The government’s rhetoric is that they won’t subsidise the gas industry, they will crack down on rorts and waste by the previous government. Well, there’s nothing—nothing has changed, and it’s just astonishing.”
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