Lyndon Hood - power fighter, Lower Hutt

Thursday, December 02, 2004

Exploding Gas Giants

The commerce commission says some gas companies are abusing their monopolies. I won't pretend to be shocked. I'm sure that if they were in a competitive market they would do their best to abuse that as well. What are people going to do? Stop using gas?

Anyway, the decision invokes the spectre of direct price controls. Nobody likes a private utility and the idea of the people's representatives sending Powerco and Vector a final notice will be appreciated. As with the typical final notice, we can expect howls of outrage from the recipients, followed by immediate compliance.

One assumes they will be falling over themselves to look like good corporate citizens, at least for the near future, and that direct intervention will only come if and when they fail to pull their head in. If price controls eventuate, they 'may' result in lower prices for the consumer.

I've written before about utilities and I do think that private power companies need to be closely monitored and well regulated. But I can't help thinking that maybe gas should be expensive.

This is mostly an environmental thing - the idea that the cost of something should recognise the way it degrades the value of everything else. The price increase would come in the form of a pollution tax, of course, rather than flowing into the coffers of evil corporations. Unless said evil corporations were made to clean up every little bit of the mess they made.

On the other hand, if your pollution tax works and people stop polluting, what will you do for revenue then?

There's also an argument from what they rather over-enthusiastically call 'green' accounting. Fossil fuel in the ground, it's argued, is an asset. When you dig it up you're not creating it at the cost of extraction, you're diminishing your inventory. If companies and countries worked things out in those terms, they might be a lot more reluctant to just throw the stuff away.

Some have suggested, or possibly assumed, that exploration encouraged by rising prices will overcome or delay the projected peak oil (the point where demand exceeds our ability to get it out of the ground). It's also possible that new technology will supercede petrol before things get really horrific. Based on human history I suspect that, unless it's really good technology, we'll go on using fossil fuel until getting it becomes impractical. And it's going to take something pretty remakable to stop us using it up as fast as we can.

So does it actually make much difference if we use it up quickly or slowly?

A higher gas price might encourage people to put what's left to optimum use. If it effected demand much at all, which it probably wouldn't while it's still cheaper than electricity. What are people going to do? Stop using gas?