Labor's doing to gas what they're doing to housing

Labor central planning and regulation are causing trouble all over the economy.

Now they're fiddling with the gas market in a way which will produce less gas and damage the finances of Queensland, the state that produces most of it on the east coast.

The Domestic Gas Reservation Bill 2026 will also imperil the energy transition.

One of the underappreciated facts of this transition is that by 2050, the date selected for Net Zero, AEMO modelling projects the grid will need 17 GW of gas-fired power.

This is 42% larger than the current gas fleet and equal to about a third of projected combined regional peak demand.

Other estimates, such as one by Net Zero Australia, put the maximum requirement closer to 50 GW to match peak capacity. Without complete backup we run the risk of serious blackouts, and even grid collapse.

We also need gas to make a range of products like fertiliser, explosives, bricks and cement.

The plan on the east coast is to force the gas exporters at Gladstone to divert 20% of their LNG exports to the Victorian, NSW, South Australian, Queensland and Tasmanian markets which the government has mandated will be 10% oversupplied.

Oversupply is the first problem. Normal markets fluctuate between over- and undersupply and are virtually never in balance.

If you have a government policy designed to maintain a 10% oversupply you suppress the price signal that would otherwise attract new or continuing investment and encourage new supply. Production from gas wells declines over time, some very quickly, and to maintain supply the industry needs a price which will maintain investment.

Industry modelling puts the likely price of gas under a 20% reservation scheme at around $3 at the Wallumbilla hub in Queensland while requiring another $3 for piping to southern markets. This modelling was done without the oversupply requirement so will be conservative.

Southern producers who don't need to pipe long distances will suffer a price drop of 44% from a modelled price of $10.60 to $5.90, but the impact is even harder in Queensland where prices would drop from somewhere around $10 to $3, or by 70%.