“Cartel-like” gas companies are making billions from the war in Ukraine

“Cartel-like” gas companies are making billions from the war in Ukraine

LNG plant in Queensland

Photo by Patrick Hamilton/Bloomberg via Getty Images

Russia’s ongoing war in Ukraine has proved lucrative for Australia’s “cartel-like” gas companies, which raked in almost $40 billion in profits last year while Australian households paid “outrageous” prices for local resources.

Now experts are urging the Australian government to introduce a windfall tax that could solve Australia’s recent gas supply problems and fully fund the government’s climate policy in just a year – with plenty of spare change.

Before invading Ukraine, Russia supplied about 8 percent of the world with gas. After Russian President Vladimir Putin launched his onslaught, much of the Western world imposed tariffs on the country, leaving large swathes of the world’s leading economies with severe energy shortages.

Australian gas companies jumped at the opportunity to fill the gap and have struggled through the turmoil ever since.

After Russia launched its invasion of Ukraine in February this year, Australian gas prices have more than doubled and are expected to rise even further over the next 12 months. The price jump has in turn caused the value of gas exports by Australian companies to rise from about US$30.5 billion by 2021 to US$70.2 billion by 2022.

During this time acc new analysis According to the Australia Institute, the amount of gas Australia-based gas companies shipped to other countries stayed about the same, as did the cost of doing business.

Richard Denniss, executive director of the Australia Institute, said Australia’s gas companies were “essentially benefiting from the war in Ukraine”.

“Gas companies make unexpected profits by selling the same amount of gas to the same customers without practically increasing their costs,” said Dr. Denniss.

“Australians are paying too much at home for their own gas and are not getting a fair share of the revenues from the gas we export overseas,” he said.

It is a recurring theme that initially put the Albanian government under increasing pressure in June of this yearas wholesale energy costs rose 141 percent year-over-year.

Just a few weeks later, the market operator had to step in and impose price caps in Sydney and Melbourne after gas prices rose more than 50 times above normal levels in some cases.

Experts suggest a windfall profits tax could help solve Australia’s domestic supply problems and “blackmail” prices by making locally-based gas companies less attractive to export overseas. The tax, already active in the UK, is not a radical idea.

So far, his supporters have included former finance minister Dr. Ken Henry, Nobel laureate in economics Joseph Stiglitz and Atlassian co-founder Mike Cannon Brooks. However, the Albanian government has so far dismissed all calls for a windfall tax ahead of its first budget, which is due in just over a week.

With more than $1 trillion in debt, Treasurer Jim Chalmers faces serious revenue problems, many of which could be solved by a cutthroat 80 percent windfall profits tax.

It could reinforce government promises of integrity, that multinational companies will “pay their fair share” of taxes, that they will implement robust climate change policies, and that they will ease the pressure on the cost of living for average workers. Mark Ogge, senior adviser on climate and energy at think tank Australia Institute, told VICE the government might just be scared.

“[Major windfall profits are] actually a huge net negative for the Australian economy because [they’re] Drive up energy bills for all Australians. The gas expansion on the east coast in particular was an economic catastrophe for Australia,” said Ogge.

“And then we have an opportunity to actually reclaim some of the value for the Australian community and the Australian government just lets it go, apparently because they’re either committed to the gas industry or afraid of it.”

The government’s approach to industry has begun to reveal fissures within the Labor Party. Earlier this month Industry Secretary Ed Husic took a hardline position on gas companies operating in Australia, which he says should decide whether they are “part of Team Australia” or “team greed”.

Husic’s position is at odds with the Government’s Resources Secretary, Madeleine King, who last month negotiated a deal with gas companies that presented what was effectively a handshake deal, with gas company heads pledging to offer Australian customers all available supplies before shipping abroad.

King promised at the time that the deal would lead to falling gas prices. But they didn’t, and Australian customers continue to pay the same prices as other customers around the world.

In response to questions from VICE, a King spokeswoman couldn’t say if she would support a windfall profits tax, but insisted that “ensuring multinationals pay their fair share of taxes in Australia” is a priority for the government remains.

An analysis conducted in May this year found that only four of the five members of the Australian Petroleum Production and Exploration Association paid taxes on the combined income of nearly 140 billion 12 months between 2014 and 2020.

Ogge said the industry’s “disproportionate” hold on the government conflicted with “their commitments” to crack down on multinational tax avoidance, climate change and various other campaign promises that have proven central to their platform, while simultaneously opening up more gas projects and refused to intervene in mega wins.

“The government’s rhetoric is that it will not subsidize the gas industry, it will crack down on the previous government’s rot and waste. Well, there’s nothing – nothing has changed, and it’s just amazing.”

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