Demand and Supply of Certain Resources in Australia CSG

Question: Discuss about theDemand and Supply of Certain Resources in Australia for CSG. Answer: Introduction The chose product for this discussion is gas products in Australia. The main question addressed in this article is where did all the gas go? Australia is exporting a record volumes of the gas in the middle of the energy crisis that has been alleged. This absurdity is caused by the free trade logic. The gas productions on the Australian east coast has escalated by the almost twenty percent in the past three years in the greater portion due to farmers being unable to bar the spread of Coal Seam Gas fracking (CSG) in the Queensland. While it would not frequently rational to attribute an increase in the gas generation with a shortage, it is in the same manner that the government would not be anticipated to argue the cuts on tax for large business remain healthier means to boost wages (Denniss 2017). Definitely, the Australian gas market is trapped in confused times. It is, however, clear that gas molecules shortage is never in shortage as they are being extracted in Australia. However, it is surprising that the price that the Australian electricity generators alongside manufacturers charge for the gas molecules has escalated closely threefold. The surged gas prices subsequently have culminated into high electricity prices alongside the latest blackouts. Thus, the question is what is going on? Attempts to understanding and answering this question leads us to the need to critically evaluate the going on in the gas market based on the economic forces of demand and supply of the gas products in Australia (Denniss 2017). Discussion Till 2014, the entire gas generated in South Australia, Bass Straight, Victoria, NSW, and Queensland was sold through an elongated pipeline network to the generators of electricity, industrial users and households along the east coast. The gas was in surplus, comparable to the local demand, and subsequently it was sold cheaply. Despite the cheap price due to abundant gas sold being sold at low prices to the Australian industry that was a plus to the manufacturers, the gas companies were never happy with this move. Therefore, in 2017, the gas industry set around a lasting and increasingly expensive plan to drive the gas prices upwards substantially. The gas industry has succeeded in this goal of increasing gas prices as manifested in squealing from the manufacturing and electricity sector (Ratnasiri and Bandara 2017). The diagram below illustrates the incremental supply in LNG in Australia in 2012. The East Coast gas producers problem was that whereas Asian customers were more than willing to pay escalated price for the Australian gas relative to the average Australian Styrofoam factory and fertilizer plant, this locked ways to move gas from Brisbane to Tokyo. Despite being feasible and straightforward to rent the ship as well as dump the load of coal on the ship, to export the gas in such ships with the large bubbles on the ships, the gas has to be initially liquefied hence LNG. This affects the supply and demand of the gas since it adds onto the cost as liquefaction costs tens of billion due to the cost of building the huge bit of kit. However, it is irrational to fault the gas industry for lacking the ambition having acknowledged that they might triple the price charged price for the gas provided as there are no royalties payable on the gas generated in Australia. The gas industry sought to build not one, but three huge gas liquefaction plants adjacent to one another in the Gladstone at a merged cost of around $60 billion dollars. Following certain huge cost blowouts by 2014, the East Coast generators eventually linked to the global world market, and, subsequently their ten-year plan to uplift the gas prices. The present gas industry supply and demand operates on this basis: before, there were abundant of gas producers in the country selling to abundant gas customers in the country, the price was established by the willingness of the last client to pay for an additional molecule of gas (Marginal cost prices). So long as that final customer was willing to pay a price which was higher than the cost of acquiring an additional molecule out the ground, the manufacturer would have discovered a gas producer willing to sell the gas to them. After spending $60 billion in building the export infrastructure, the gas producers in Australia currently choose between selling the Australian gas to domestic manufacturers at the initial price or selling Australian gas to the Korean or Japanese customers at the much greater global price. The proper capitalist do not prefer to discriminate based on racial aspects, but merely engaged to ensure a buck. The gas industry does not refuse to sell gas to the Australians, however, they shall presently singly sell to the local buyers at the prices along with terms that are at minimum as lucrative as they can obtain from the buyers from Asia (Varsei and Polyakovskiy 2017). The below figure illustrates the more prominent shift in global demand in LNG over the 2012. The Origin Energy has clarified that it has supply of gas available to be contracted to customers over forthcoming winter. Nonetheless, the present stringent supply-demand balance in the market, the gas will continue to flow where it is demanded. This means that the demand and supply of gas in Australian is determined based on the who value the gas the most with the value implying the willingness and ability to pay the highest price due to the free trade influence (Shi and Variam 2017). The gas producers prefer the gas to Asians at higher prices to selling the gas to local Australians manufacturers at low prices due to elastic demand of the gas. Thus, the Australian gas is presently sold to the uppermost offshore bidder (Mehrotra 2017). This follows the effectiveness of the $60 billion plan undertaken to export the gas at higher prices that is functioning as planned ten years down the line. The intention the Minister to remove limits on CSG extraction is expected to be counterproductive as it will escalate the amount of gas exported instead of reducing the local gas price. Conclusion As revealed above, no overall gas shortage in Australia. Any particular company willing to sign a lasting contract promising to purchase the gas at 3-times the price they initially used to pay will have the ability to secure every gas demanded. The free trade has both losers and winners with regards to Australian gas industry (Emodi 2017). The Minister is irrational when blaming the states and environmentalist but should come out to rationally attach the escalated gas prices to the free trade influence as gas is sold to the highest offshore bidder based on the marginal pricing mechanism. The blame shifting by the minister will neither lower gas prices nor evade the looming blackouts next summer. References Denniss, R., March 10 2017. Where did all the gas go?. The Sydney Morning Herald, Issue Gas Industry , pp. 1-4. https://www.smh.com.au/comment/where-did-all-the-gas-go-20170309-guuct6.html Emodi, N.V., Emodi, C.C., Murthy, G.P. and Emodi, A.S.A., 2017. Energy policy for low carbon development in Nigeria: A LEAP model application. Renewable and Sustainable Energy Reviews, 68, pp.247-261. Mehrotra, A., 2017. Issues and Challenges in Development of Efficient Gas Market. In Natural Gas Markets in India (pp. 197-215). Springer Singapore. Ratnasiri, S. and Bandara, J., 2017. Changing patterns of meat consumption and greenhouse gas emissions in Australia: Will kangaroo meat make a difference?. PloS one, 12(2), p.e0170130. Shi, X. and Variam, H.M., 2017. East Asias gas-market failure and distinctive economicsA case study of low oil prices. Applied Energy, 195, pp.800-809. Varsei, M. and Polyakovskiy, S., 2017. Sustainable supply chain network design: A case of the wine industry in Australia. Omega, 66, pp.236-247.