Government to tell oil giants to use it or lose it

[Leftofcentresalterego]

The government appears to be preparing to get tough with oil multinationals who buy up Australian oil and gas leases then simply sit on them. Since the system was introduced in the mid-80's, an ever increasing portion of our oil and gas reserves have become locked up by companies hoarding leases without developing them, while developing assets overseas instead.

As much as we should be desperately scrambling to put alternative fuels in place, oil (and gas) development are important to our recovery from recession and job creation.

The next thing that should come under reveiw is the parity system. Even if enough domestic oil and gas is developed to power Australia for the next 50 years, the parity system will allow them to charge the global price - something that will skyrocket as global demand begins to exceed global supply. In that situation, the magic of the free market would result in Australia having a local surplus of petroleum while being forced to pay as though there were only a few drops left.

http://www.theaustralian.news.com.au/st ... 02,00.html

[Jovial Monk]

Yeah, getting some of these guys to explore & develop would stimulate the economy no end. Some of these holding leases are penny dreadfuls that use their leases to raise funds & keep the company--and company cars, lunches etc--going but have no intention ever of sinking a hole which could show their lease is just whale pasture.

Bigger companies have likely done seismic and want to sit on good probable reserves until oil is $200/bl but fuck them, it is OUR resources. Typical of Howard not to do anything about this, typical of Rudd and hoipefully state govt desperate for revenue that they are going to take some action. Just increase the cost of holding a lease and structure so you are paying a fortune after 10 years say of just sitting on a lease, year 11 you lose the lease.

[freediver]

It makes sense to do that. If you own a lease in a politically unstable region of the world, you exploit it first. You leave the more stable ones for later when you will be able to get a much higher price for the oil. It makes our oilfields mroe valuable.

[boxy]

If alternative energy takes off, these reserves will become less valuable in the future. This is Australia trying to get our share of the big bucks before polluting commodities become worthless.

[freediver]

Oil is likely to run out first. It is more greenhouse friendly than coal, and there are far fewer reserves. Most of our emissions come from coal, which is a lower value use of emissions, and which has more suitable alternatives, so oil is likely to continue being used for longer - ie until it runs out.

[Leftofcentresalterego]

It does indeed make our oilfields more valuable Freediver - to someone else. We need jobs and development when it suits us, not when it suits someone who isn't remotely interested in Australia's national interest unless it affects their bottom line.

What makes sense to someone whose interests span many national borders simeltaneously and is restricted to the singular objective of profit maximisation is not necessarily the most sensible thing for us.

[freediver]

It does indeed make our oilfields more valuable Freediver - to someone else.

Exactly. So they are willing to pay more for them. By undermining their value, we undermine the value of all our natural resources. Don't be tricked into thinking that this is the last time we will sell an extraction right and it won't hurt us to screw the person who buys it.

[Leftofcentresalterego]

First, oil will not run out. We will not get down to the bottom of the last barrel. Instead, demand will begin to exceed supply, driving the price skyward and setting us up for major economic chaos. Petroleum is so crucial to the day to day running of every modern society and economy that at this point in time, we simply cannot refuse to buy it no matter how high the price goes. There is some elasticity in demand but only up to a point.

Second, I think you're missing the point here Freediver. What if we decide that we need to start exploiting those resources ASAP - and we have sold the leases to someone who has no intention of doing anything other than keeping them locked up and sitting on them? Who is screwing whom in that case?

It is wrong to assume that simply allowing transnational corporations to lock up our energy resources until they feel that the price will reach some phenomonal amount per barrel or cubic foot will automatically be good for us.

[boxy]

Not so lefty. There is a cap on the price we will pay, because there are viable alternatives as the price increase, be it biofuel or electric, or something yet to be developed. The more prices rise, the more attractive these become. Fuel wont run out, instead it will only be used for industries that need (actually need it) instead of for mass consumption, which will swap over to alternatives as they become price competitive.

[freediver]

First, oil will not run out. We will not get down to the bottom of the last barrel. Instead, demand will begin to exceed supply, driving the price skyward and setting us up for major economic chaos.

Same thing.

Petroleum is so crucial to the day to day running of every modern society and economy that at this point in time, we simply cannot refuse to buy it no matter how high the price goes.

Crap. There are always alternatives, including not using it. We are not so beholden to cheap oil as some make out.

Second, I think you're missing the point here Freediver. What if we decide that we need to start exploiting those resources ASAP - and we have sold the leases to someone who has no intention of doing anything other than keeping them locked up and sitting on them? Who is screwing whom in that case?

If you sell something to someone else you give up your right to exploit it. This is what south American dictators try to do, and their people always suffer as a consequence as foreign businesses pull out. If we need to exploit it that much, it will be economical for those who own it to exploit it. That's what capitalism is all about.

It is wrong to assume that simply allowing transnational corporations to lock up our energy resources until they feel that the price will reach some phenomonal amount per barrel or cubic foot will automatically be good for us.

No it isn't. You sound like you are regurgitating communist propaganda.