01/08/2006 - 22:00

Masterstroke or blunder on gas?

01/08/2006 - 22:00

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I can’t work out whether Premier Alan Carpenter has pulled a masterstroke of politics or blundered beyond compare with his talk of reserving gas for domestic use.

I can’t work out whether Premier Alan Carpenter has pulled a masterstroke of politics or blundered beyond compare with his talk of reserving gas for domestic use.

The economic dry within me says it’s silly to try to resist the pull of market forces, and that by robbing Peter to pay Paul you simply distort your economy and damage it.

What’s more, it seems crazy to try and lock away gas supplies for local use when we are hardly facing an energy crisis.

We have huge amounts of coal we can’t sell and masses of uranium we won’t sell. I don’t buy the clean gas argument here because atmospheric warming is a global issue, so it doesn’t matter if we burn gas and force others to burn coal.

There is also the sovereign risk element. The premier may give future gas investors the jitters.

But to take a less rationalist view, there’s an argument that with resources so heated and gas so much in demand, putting off a few projects for a few years won’t harm Western Australia immediately.

And Mr Carpenter hasn’t, of course, made any decrees, yet.

Which makes me wonder about this strategy. If a big project fails to get the go ahead, you could argue the biggest loser is the federal government, which gets the royalties from new offshore production.

The winners are likely to be minerals processing companies and other big industrial users, who pay much more in royalties and taxes to the state.

So maybe Mr Carpenter is simply doing what any businessman would do, favouring his best customers. But this could make them fat, lazy and less competitive – like the protected carmakers of old.

There are some other potential downsides. Scaring the oil and gas industry is not clever, just at a time when Perth is strongly emerging as a niche player in this global sector. We want these companies to set up camp here, and such policy won’t encourage a long-term commitment.

Then there’s a big doubt about how you’d price a domestic allocation. Do you set it in stone or make it a certain amount cheaper than the export price? Either way has risks and may not solve the problem.

Like we said last week, governments aren’t good at picking winners.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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