Profiteering energy corporations are holding us to ransom
Profiteering energy corporations are holding us to ransom)

Electricity bills are set to soar across the east coast of Australia, driven largely by surging coal and gas prices. The price of thermal coal exported from Newcastle has leapt by almost 500 percent in the past year. Meanwhile, gas prices recently shot up to ten times what they were in March, before being (temporarily) capped by regulators at $40 per gigajoule.

For millions of workers already facing rising prices for food, petrol, rent, mortgage repayments and everything else, a whopping winter power bill looms.

Some smaller electricity retailers have even contacted their customers, suggesting they find a new provider. In an email to its 70,000 customers, ReAmped wrote, “[W]e are now in the unpleasant position of advising you that you can get much better prices with another power company”. Such moves weren’t motivated by generosity, however, but by the fact that these retailers’ profit margins have been completely wiped out, such that even with significant price increases, the more customers they have, the more money they stand to lose.

Economic pundits generally agree on the causes of this energy crisis. Globally, energy prices have been rising steadily as demand for energy increased with the economic recovery following the dramatic slump associated with the COVID-19 pandemic. Russia’s invasion of Ukraine, and many European countries’ desire to reduce Russian gas imports, have led to a further spike.

On the domestic front, a number of coal-fired power stations breaking down recently and a winter cold snap have increased reliance on gas, further driving up already high prices and leading to a major spike in wholesale electricity costs. Around 70 percent of electricity generation in Australia is still sourced from fossil fuels, with coal alone accounting for around 60 percent.

The big energy companies, and the new Labor government that desperately wants to avoid any confrontation with them, would very much like to leave the explanation there. It’s just the free market at work, and as newly appointed Minister for Climate Change and Energy Chris Bowen put it in an interview with ABC radio, there’s “no easy fix” in the short term. Nothing to be done, then: we’ll just have to grin and bear yet another assault on our living standards.

Scratch the surface, though, and it becomes clear that this is yet another illustration of how mad it is to let profit-driven energy corporations determine whether or not you can afford to turn your heater on at night, and how easy it would be to fix things if the government was willing to take them on.

To begin with, Australia ranks among the top three exporters of coal and liquefied natural gas (LNG) in the world. There’s absolutely no coal or gas shortage that justifies energy corporations hiking up household power bills. Eighty percent of the gas produced in Australia is exported. Of the remaining 20 percent, less than a quarter goes towards residential use in the form of gas or gas-fired electricity, the rest being used by industries like mining and manufacturing. That means less than 5 percent of all gas produced in Australia is going towards residential use. Incredibly, the amount of gas consumed in the process of liquefying gas for export is more than double the amount used by households.

There’s no gas shortage. What there is, rather, is a shortage of gas companies willing to take a hit to their profits to sell more of their product on the domestic market. As economist David Llewellyn Smith told the ABC, “Australians are paying through the nose for gas they own because there is a gas export cartel that is war-profiteering on the suffering of the Ukrainians”.

To give some idea, the Financial Review reported last October that a single cargo of LNG was fetching up to $282 million. Profits for Santos and Woodside Petroleum—Australia’s two biggest gas exporters—are forecast to more than double this year. These are companies that pay little or no tax, employ few workers and receive billions in government subsidies.

Many are hopeful that the high price of gas and other fossil fuels will drive a more rapid shift to renewable energy, but the logic of the market works in the other direction too. The windfall profits of Woodside, for example, have spurred a surge of investor interest in its new $16.5 billion Scarborough gas project off the coast of Western Australia. The project is expected to emit 1.4 billion tonnes of greenhouse gases over its lifetime, more than three times Australia’s current annual emissions. It has received the full backing of the new Labor government. These new fossil fuel projects are being sold to the public with the claim that increased gas production will lead to lower power prices, but the current crisis shows that to be nothing but hot air.

So far, Labor has thrown up its hands in the face of the energy company’s profiteering. It could move to emulate, on the east coast, the current regulation in WA, which requires the gas giants to reserve 15 percent of production for domestic use. So far this measure has meant WA has escaped the steep price rises seen in the rest of Australia. It could move simply to cap gas and electricity prices, especially for household use, while forcing the energy companies to maintain supply. It could copy British Conservative Prime Minister Boris Johnson’s 25 percent “windfall tax” on energy company profits—raising billions of dollars that could be used to alleviate cost of living pressures on workers and the poor.

Better yet, it could nationalise all the energy companies, provide cheap power to households directly and use revenues to fund the transition to 100 percent renewable energy.

Instead, all Labor has done is convene a meeting of energy ministers, which announced an investigation into the Australian Energy Market Operator being allowed to buy and store a gas reserve for the east coast market. At best, this may serve to iron out a future price spike, but it does nothing to break the stranglehold of the energy corporations, and won’t do anything in the face of sustained price increases. The costs of buying and storing this gas reserve will also be paid by consumers “on a cost-recovery basis”, according to Bowen.

Seriously taking on the energy companies would require Labor’s leaders to go against their concerted “pro-business” election pitch, Prime Minister Anthony Albanese’s years of sucking up to corporate Australia and the very DNA of a party that long ago embraced the role of loyal servant to the Australian capitalist class. Burned into Albanese’s brain must be the fate of former Prime Minister Kevin Rudd’s mining super-profits tax. Had the tax been implemented in 2012 as planned, it would have raised billions in revenue, which Rudd intended to distribute to other capitalists via corporate tax cuts. But a scare campaign run by the mining companies was enough to make Labor capitulate in record time, dump Kevin Rudd and replace him with Julia Gillard, who promptly rewrote the tax to let the companies off scot-free.

The current energy crisis is just one part of a bigger picture, in which workers’ living standards are being driven backwards dramatically by spiralling prices for all our basic necessities. Real wages are down, while profits are up. It’s a class struggle, and right now we’re losing badly. Labor is not on our side. Along with regulation to rein in the profiteering corporations, workers in all industries should be demanding and striking for big wage rises.

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