EnergyQuarterly March 2021 A Wild Ride in Energy Markets

The March 2021 EnergyQuarterly report has just been released, with comprehensive Australian energy data for the December Quarter 2020 and the 2020 calendar year plus analysis of the latest developments. 

It has been a wild ride in energy markets over the last year. Oil prices crashed and then soared back to where they started. A freezing northern winter drove spot gas prices up to the point where gas was more expensive than oil. And east coast electricity prices have crashed thanks to COVID and the flood of renewables.

We pick up all of these themes in this report. We note that the pandemic-induced slump in global oil demand was the biggest since 1979. Amazingly oil prices are now back to where they were at the end of 2019 but will they stay there?

We dive into the weather-induced gyrations in spot gas markets in Asia and the US. The Asian market is clearly no paragon of economic textbook perfection yet it drives estimates of east coast LNG netbacks. We ask whether it is time to rethink netback methodology.

The pandemic also drove down gas generation in the NEM to levels last seen over a decade ago. We ask whether gas is going the way of coal. Maybe in theory but it is not so obvious in practice.

COVID has exposed some collective policy failings of Australian governments over many years. The pandemic has been the kiss of death to at least two oil refineries. Australia has dual transport fuel challenges, supply security and emissions. The federal government is still coming up with piecemeal responses to both rather than a coherent policy. Similarly, on east coast electricity, Dr Kerry Schott, Chair of the Energy Security Board, is warning of the growing risk to supply security in the NEM.

She is not the only one concerned about energy security. In its latest Gas Inquiry Interim Report, the ACCC has affirmed the looming southern gas supply cliff. West Australians got twitchy when the latest WA Gas Statement of Opportunities warned of a possible tight gas supply situation eight years away in 2029. However, Victorians do not appear to care when the ACCC says the state could face a gas supply problem as soon as 2024. Instead, they take to virtue signalling, banning fracking in the state constitution.

Not that everything in the west is rosy. Making a change from east coast reserves writedowns, there have been significant reserve writedowns at Reindeer and Pluto. Overall Australia’s performance in replacing gas reserves has been poor in recent years. We are fast eating into past discoveries. However, one intriguing possibility is to explore and drill for hydrogen, something proposed by the Geological Survey of Western Australia. That is just the kind of innovative thinking we sorely need in a world aiming for zero net carbon by 2050. As well as being a fossil fuel superpower, Australia is also already a renewable energy superpower. Commercial discoveries of hydrogen would cement this status.

The report also has 88 Tables and 73 Charts, providing the latest numbers on Australian energy in 2020.

Further infomation, including the brochure with full table of contents, can be obtained by clicking here.