The Port Phillip Publishing office was closed this Friday. As citizens of the great state of Victoria, most of us will be participating in our most important religious ritual; watching the AFL Grand Final. As a Canadian immigrant to Australia’s fair shores, I find the game a little mystifying, I have to admit. That won’t stop me attending a Grand Final party, though! By the time you read this, it may already be over. But writing it now, before the fact, I have to throw my support behind the Victorian team. Go Tigers!
But nice as it would be to pretend a football game is the biggest of our issues, that’s just not the case. A recent report from the Australian Energy Market Operator (AEMO) and the Australian Competition Consumer Commission (ACCC), warn that natural gas shortages in Australia next year could be three times worse than previously predicted.
In case you haven’t been following the story, even the previous predictions were pretty dire.
The heart of the problem is that natural gas producers are able to get better prices for their product overseas than at home. And if they can, why wouldn’t they?
Which would be fine, if Australia had an alternative in place. But energy investment in this country is an incredibly risky prospect. Coal and gas miners are swimming in subsidies and preferential treatment from their mates in the conservative parties. Solar and wind power receive the same sorts of subsidies when the other side of the aisle is in power. And every time we switch governments, energy investors on one side or the other have the rug pulled out from under them.
One can’t help but wonder if we wouldn’t all be better off with the government keeping their hands off entirely.
At the tender young age of 30, it may not be too hard to guess where I see the future of energy production. Not least because I quite like living in St Kilda and would prefer not to see it underwater in my lifetime. But even fossil fuel’s staunchest defenders might be taken aback to learn how much our government spends propping it up. Coal subsidies alone cost us $1.8 billion a year.
This week, Prime Minister Malcom Turnbull has used the threat of export controls to extract a promise to meet Aussie supply needs first. This may be enough to head off the current crisis. But long term, government controls can’t solve Australia’s energy crisis. If export controls make it reduce the profitability of producing gas, producers will simply stop exploring for it. And then we’ll have the exact same crisis, slightly delayed.
A better solution may be to stop interfering in energy markets entirely. Don’t control exports. Don’t subsidise exploration or production. For fossil fuels, or any other type of power. Let consumers choose where to buy their power and let the market sort out the prices. Then we might finally find out what the best solution is.
And make no mistake, we do not currently know. The entire debate is too hotly politicised, and the statistics too distorted, to draw any honest conclusions.
It’s impossible right now to have any sort of discussion of energy investing without politics getting involved. It’s impossible even to discuss the numbers, without highly politicised statistics being thrown in your face. I expect I’ll receive my fair share of angry emails in response to this article.
But we thrive on that, here at Money Morning. Feel free to send your comments and criticisms through to email@example.com. We can’t personally respond to every email, but we read them all.
By the way, our own Greg Canavan has been following this story for quite some time. He was warning about the crisis in Aussie natural gas prices long before the mainstream press caught on. His Crisis & Opportunity subscribers made some tidy gains out of that one. And today, Greg’s looking at another energy story that could mean big returns for you. Check out the details here.
This week in Money Morning
Science fiction verged on reality in Monday’s Money Morning. Ryan looked at billionaire tech investor Elon Musk’s latest pet project, the Hyperloop. Imagine a kind of underground rocket train. One capable of 1,000kph speeds. This sort of leap forward in public transport technology could change how we live and how we build cities across the world. And Australia has a chance to be one of the first test-beds. For Ryan’s take on the revolutionary affect it could have on Australia’s economy — not to mention property market — click here.
‘Big data’ is a phrase the IT industry has been using for only a few years. And it has spent even less time on investors’ radar. But as Ryan wrote Tuesday, getting an edge on the market with a massive data advantage has been a winning plan for centuries. The trend isn’t likely to change soon. For Ryan’s three best ideas to profit from the big data era, check out Tuesday’s article here.
On Wednesday Ryan asked if you would like to know the best investments for the next decade. And who wouldn’t? He looked at the big trends that could be the best investments for the next 10 years. And one popular investing trend that might finally be running out of steam. Read Wednesday’s Money Morning, here, for all the details.
On Thursday, Ryan revealed one of the indicators he uses to get an edge on the market. It can act as a sort of ‘warning bell’ for stocks to avoid. Or, if you’re willing to take on more risk, he explains how you can use it to find unloved stocks with the potential for big gains. To find out what Ryan’s indicator is and how you can use it, find Thursday’s Money Morning here.
Finally, we rounded out the week with a look at the nervousness in the market — and why it could be a bullish sign. Ryan discussed why this has been such a ‘reluctant’ bull market. He argues that the end of the bull market won’t come while investors are still so cautious. Instead, he believes it will come after a ‘melt-up’ phase, which hasn’t even begun yet — which represents an opportunity for you, now. Read the details here.
That was it from the Money Morning team this week. If you’re a Victorian I hope you’re enjoying the long weekend.
Until next week,
Editor, Money Weekend