At a time when the federal budget is bursting at the seams and Australians are struggling under the rising cost of living, a popular campaign to reap up to $17 billion a year by forcing multinational gas exporters to pay their “fair share” for the nation’s finite resources is gaining traction.
But the world has changed, and there’s a new elephant in the room since the campaign started.
As Prime Minister Anthony Albanese holds deliberations over the May budget with his senior ministers, the war in Iran has created an unprecedented risk to Australia’s fuel security.
Australia’s imminent loss of sufficient petrol and diesel supply is now the most pressing issue confronting the federal government.
The gas tax campaign has been spearheaded by left-wing think tank the Australia Institute and independent senator David Pocock.
Pocock went viral with a social media video where he got a government official to admit that tax on beer would generate more than the Petroleum Resources Rent Tax would reap from gas companies, with payments of $2.7 billion compared to $1.5 billion, respectively. The gas sector’s total tax bill for 2024-25, including company tax and state royalties, was $21.9 billion.
The senator says the only loser in their plan to slap a 25 per cent tax on exports would be the gas companies themselves.
The winner? The federal budget, which is in dire need of a revenue injection.
Pocock’s video was recorded in Senate estimates in early February, weeks before the outbreak of the Iran war and the global oil shock that followed.
Around 20 per cent of the global oil supply is disrupted by Iran’s blockade of the Hormuz Strait. There is a real prospect of the need for fuel rationing and significant economic damage if the war drags on and Asian refineries run short of oil.
Australia’s fuel security is now directly tied to the nation’s gas exports.
Most of the nation’s fuel comes from Asian refineries, which source about 70 per cent of their crude oil from the Middle East.
Some of the biggest investors in Australian gas export projects are also among the nation’s biggest suppliers of petrol and diesel – namely Japan, Malaysia and South Korea.
To ensure their energy security, Japan, Malaysia and South Korea made massive public investments decades ago to help build Australia’s gas export industry, and it’s also why they rail against new gas export taxes.
The ace up Albanese’s sleeve is that these nations, which lack their own gas production, depend on huge amounts of Australian exports to run their electricity grids.
That’s why Albanese went on a charm offensive tour of Asian fuel refining nations in the past two weeks, seeking assurances that Australia will be prioritised when it comes to fuel supply.
How did the prime minister get those assurances? He leveraged Australian gas when he promised during visits to Malaysia and Singapore “no surprises” on those exports.
His Malaysian counterpart, Anwar Ibrahim, stood beside Albanese last week and said that “friendship” among trading partners depended on both parties keeping their word.
“We will exchange views on energy trade-related matters on a ‘no-surprises’ basis, and deepen practical co-operation on energy security,” a joint statement issued last week by Albanese and Ibrahim read.
The Asian trips were a diplomatic win, with two of Australia’s biggest fuel suppliers promising to prioritise the country in a war-ravaged global market.
However, independent MPs and the Greens say Australia can raise taxes and maintain fuel security.
“The truth is that we rely on each other for energy security and Australia can be both a reliable ally and get a fair return on the sale of our gas,” Pocock said.
“We need only look to Norway, which imposes a 78 per cent marginal tax rate on petroleum profits, and does not suffer retaliation from buyers,” said teal MP Zali Steggall.
Peak gas lobby group Australian Energy Producers claimed an export tax would “undermine energy trade relationships and put the country’s energy security at risk”.
Opposition Leader Angus Taylor said a 25 per cent export tax “would close down the gas industry”.
What options are left for the government?
It could attempt to thread the needle with a tax that applies only to gas sold to the spot market, exempting the long-term contracts that supply Japan, Malaysia and South Korea.
Such a move could generate $5 billion a year, less than a third of a blanket export tax. There is also the risk that any new tax would prompt Asian nations to rescind their fuel supply promises.
Despite the parlous budget and groundswell of support for a big tax on massive gas companies, fuel security may not just be the elephant that is impossible to ignore – it may stamp out a new gas tax entirely.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
