The Inconvenient Truth About High Gas Prices

‘High gas prices threaten thousands of jobs, billions of dollars: industry.’

That was the headline for an ABC story on July 21 about a report by Deloitte Access Economics. Fairfax media ran a similar story with the headline ‘Thousands of jobs at risk due to surging gas price, new research warns’.

But is it the full story?

There are a couple of reasons why the stories may have focussed on adverse implications for Australian industry of domestic gas prices rapidly rising as the domestic Australian gas market becomes linked with international prices.

First, the stories reflect entrenched 18th and 19th century industrial thinking that fuel (and fossil fuels in particular) is the best or main way of providing energy.

With this thinking, of course any change to the supply or cost of fuel is of concern.

That may be why the Australian Industry Group, one of the industry groups that commissioned the report, is urging an expansion of coal seam gas extraction.

If, in contrast, we focus on users’ real needs – comfortable living and working places, industrial heat, or feedstocks for manufacturing, for example – then other options become visible.

With eyes opened, we can be thinking of how to meet the needs of end-users in a sustainable, cost-effective way.

That may mean that if we are looking for thermal comfort in buildings we give more attention to building standards and less to gas for heating.

If we are looking for industrial heat or chemical feedstocks for plastics, it may mean looking for other sources of heat and chemicals… say, from renewable sources.

And that leads us to a second reason for the focus of the stories.

Australian Industry Group was just one of the industry groups that commissioned the report. Others were the Australian Aluminium Council, the Australian Food and Grocery Council, the Australian Steel Institute, the Energy Users Association of Australia and the Plastics and Chemicals Industries Association.

Although membership of these groups is diverse, it includes major fossil fuel extraction and supply companies and at least one of their lobby groups, as well as their major suppliers and customers.

Fossil fuel companies have a vested interest in seeing their products – in this case gas – continuing to be used in a (for them) favourable commercial environment.

They are not particularly concerned about the real environment, the one that enables us as humans – as a species – to live.

Rather, these companies are focussed on profits in the short term, not on the longer-term viability of a habitable environment.

But what if they were more focussed on the longer-term prosperity of both the planet (and its ability to support us) and the companies themselves?

If that were the case, companies that are currently focussed on supply of fossil fuels would be working on ensuring that provision of energy and materials to end-users takes place in a fully sustainable manner, within the Earth’s ecological limits and without destroying the environment on which we humans depend.

They would be focussed on exploiting Australia’s abundant supplies of renewable energy, to ensure security of both supply and price without damaging our atmosphere, oceans, ground water, soils, landscapes and people’s health like exploiting fossil fuels do.

And they would be developing new sources of feedstocks for manufacturing plastics and other chemicals.

That would mean that these companies would need to recognise that the old ways of doing things are becoming obsolete – and that they need to re-invent themselves to survive.

Their industrial customers would need to make changes too: changes to supplies, processes and maybe even products.

We are living in a period of creativity and change, and there are plenty of companies, entrepreneurs and innovators that are thriving in it.

They may be taking just the sort of entrepreneurial risks that Reserve Bank Governor Glenn Stevens spoke about in his speech last week to The Anika Foundation.

The Deloitte Access Economics report does not look at such wholesale change, but it does touch on some of the costs that may be involved.

More importantly, though, it highlights the costs of failing to make these changes: most Australian industries that are the subject of the report will face a cumulative reduction in industry output if they continue to rely on fossil gas.

Alternatively, they could take the plunge and make investments to adjust or change technologies with a view to their ongoing prosperity.

This situation illustrates that we are sitting in the middle of the turbulent times between waves of industrial innovation – in this case, between the fifth and sixth waves (the use of oil, gas and synthetic materials really took off during the fourth innovation wave, from 1941 to 1973).

A few companies and industries have recognised this and are facing up to the challenges, but there is a long way to go for Australian industry generally.

Can Australian companies with major exposure to fossil gas change their mindset?

Will they continue to stymie innovation by clinging to the status quo, killing thousands of jobs and billions of dollars of investment… and possibly end up as fossils themselves?

Or do they have the courage to step outside their comfort zone into an exciting new world of innovation, a world with thousands of jobs, billions of dollars of investment in renewable energy and new, sustainable materials and process technology – and a safer future?

* Gillian King is a former public servant who now works as a sustainability facilitator.