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

This price is too low to support production. Marginal producers will go out of business, and the amount of gas available domestically will decrease.

The exporters will also get less than the export price for their gas for the 20% domestic reserve, representing a subsidy from them to consumers, mostly in southern states.

According to a study by Wood Mackenzie the Queensland government will also subsidise southern consumers to the tune of $201 million through foregone revenue on the export gas. Assuming no Queensland wells actually close, we calculate a further $99 million loss from domestic sales. As wells close, that loss grows.

The excuse for this scheme is that Australia is exporting too high a proportion of its gas. But we export a lot of things - like iron ore, coal, wheat, beef – without a domestic reserve.

We also import a lot of things, and we are in desperate need of refined petroleum products like diesel and petrol which come from many of the countries who rely on our export gas.

But there doesn't appear to even be a genuine supply problem.

The ACCC forecasts enough gas across the east coast for 2027 as a whole, even if LNG producers export all their uncontracted gas, while warning of tighter southern winter supply.

If there is a genuine supply problem then you could approve wells on the basis that they will supply the domestic market only, or if the government genuinely wanted to lower gas prices, then it could increase supply by approving more wells as quickly as possible.

And it could gently insist, using its considerable soft coercive powers, that southern states start exploiting their own reserves.

It could use our current fuel crisis and its bully pulpit to educate the public about the critical role that gas plays in our economy and national security to restore the social licence for gas that "environmentalists" are keen to destroy.

Central planning introduces regulatory and sovereign risk.

Drilling for gas is a tough, expensive business which demands tight cost control, a gas price you have some chance of anticipating and a regulatory environment capable of supporting projects that run for decades.

Such a system is best run through the voluntary interactions of explorers, investors, operators and customers all calculating how to make a profit or minimise cost, rather than the dictates of a handful of politicians and contract bureaucrats calculating how to get past the next election.

This is the eighth time in the last ten years that federal governments have tried to intervene in the gas market including the $12 per gigajoule gas price cap in December 2022.

My prediction is that, just like the budget measures which are crashing the housing market, this bill will have to be repealed or neutered sooner rather than later. The consequences of it remaining in effect will be catastrophic for everyone.