10 April 2012

How best to exploit our energy gains

Letter to The Australian Financial Review: Dick Warburton, Executrive Chairman, Manufacturing Australia

Your leader writer “Hiving off gas could hobble a golden gosling” (April 2) relied on opinions from the National Energy Conference, sponsored by the AFR. Your editorial reflected the comments of proponents of Australian gas for downstream processing from Andrew Liveris (CEO of the Dow Chemical Company and key adviser to US President Barack Obama) and James Fazzino (MD of Incitec Pivot), but they may have drawn different conclusions.

The following points need to be made:

•    Fazzino stressed that this is not an either/or situation and that Australia can have its cake and eat it too – that is, a vibrant LNG export industry and a revitalised manufacturing industry based on our competitive advantage in energy.
•    In the US, the post -global financial crisis recovery is being led by manufacturing underpinned by competitive energy. Liveris compared Australia with the US with these comments: in the US, the gas price is set by the domestic market gas, because supply is owned by thousands of “wildcatters” not by the international oil companies (IOCs).
•   In Australia, the domestic price is set by the price in the IOCs’ export contracts,
notwithstanding there isn’t a free or fair market for gas.
•    There is also a role for government in managing energy policy. He said: “If America allows a lot of its stock to be exported – we calculate up to 20 per cent – then the energy price from China, or wherever, will come back to the domestic price and cripple
American industry. Obama has understood that and despite the lobbying from the
American equivalent to your industry association here, to enable exports of gas, that simply won’t happen. Government does have a role…it says I’m going to keep it home to enable my consumer, my transportation fleet, my industry, my job creators...”

Where your leader writer missed the point is that the essential argument isn’t about protectionism but about how we best exploit Australia’s competitive advantages, such as energy, to support industries which are internationally competitive for the benefit of the Australian people who “own” the resource.