Power Up: Oil prices are anyone’s guess and King calls for more gas, coal
Link copied to
As anyone who has visited the pumps recently knows, fuelling up the family SUV no longer costs your spare kidney or the equivalent of a home deposit.
This is thanks to crude oil prices dropping more than 20% since June due to concerns about a potential recession, resilient Russian production despite sanctions and lower demand.
While the Brent price has made small gains since dropping to about US$95 per barrel mid-week, it is still anyone’s guess which way prices will go.
Downward pressure comes primarily from concerns that the biggest economies are heading straight into recession territory though the latest US non-farm payrolls seem to indicate that the world’s largest economy continues to dodge that fate.
Russian oil production has also failed to drop despite expectations to the contrary, which has served to prop up supply availability, sanctions or not.
On the other hand, the poor supply fundamentals mean there’s still considerable risk of oil prices climbing back up the slope past the US$100/bbl mark with Goldman Sacs noting this week that while it has lowered its forecast, it still thinks that Brent could hit up to US$125/bbl in the fourth quarter.
Meanwhile, in a move that’s not likely to win her many friends on the crossbench, Resources Minister Madeleine King has come out swinging in favour of continued coal and gas development in Australia as we continue our transition to clean energy.
She placed special importance on gas, describing it as an ally of renewable energy, and the need for more education about its advantages.
However, one point stood out from her doorstop interview at the Queensland Resources Media Club.
King noted that while the Labor government believed more gas would be necessary, it would not “put in huge amounts of cash or something to push it forward”, adding that it was up to industry to determine if individual projects could be developed.
This is of course in contrast to the previous government and its much criticised gas-fired recovery, which included funding to support infrastructure development, and is pretty much in line with this journalist’s stance.
While we are on the topic of new gas developments, Senex Energy – owned by Gina Rinehart’s Hancock Energy and South Korea’s Posco – has announced plans to carry out a $1bn expansion of its coal seam gas project in the Surat Basin.
This development, which will need federal Environment Minister Tanya Plibersek to sign off on, will increase the company’s production to 60 petajoules per year from the end of 2025, most of it aimed at the domestic market.
That’s equal to more than 10% of the East Coast’s annual domestic gas requirements and enough electricity to power more than 2.7 million homes each year.
Opposition to the plan is already building with the Lock the Gate Alliance claiming that the increased production would not have any impact on prices.
Queensland Resources Council chief executive and former federal resources minister Ian Macfarlane disagreed, saying that it would provide supply certainty and reduce prices.
“Spot prices are spot prices, and the actual supply of gas today and tomorrow will continue to be affected by the fact that the Victorians and New South Welshmen have not developed their own supply and gas is short globally,” the ABC quoted him as saying.