It Doesn't Have to be This Way: Australia's Energy Crisis, America's Energy Surplus

Summary of Study

Bottom Line: Burdened by higher energy costs and lower reliability, Australia must learn valuable lessons from the U.S. shale revolution. Australia faces an energy crisis, stressing households and businesses and threatening the very existence of some of the country’s large industrial users of energy. Expanding energy supply is not enough, and the country requires a variety of policy mechanisms to reverse course.

Australia and the U.S. have a lot in common. They are both liberal, democratic institutions; technologically advanced, largely open economies; growing populations; demanding infrastructure; and above all, retain abundant natural resources. But for energy, Australia and the U.S. are on radically different paths.

Australia faces an energy crisis, stressing both households and businesses while threatening the survival of some of Australia’s large industrial end-users. In contrast, thanks to the shale revolution, the U.S. is reaping the benefits of an energy boom, delivering inexpensive natural gas and electricity, driving a renaissance in American manufacturing and economic growth.

The numbers tell the story. Australian households and businesses pay dramatically more for their energy than their American counterparts – two to three times as much in many cases. American households and businesses are supplied energy with greater reliability and transparency than those in Australia.

Perhaps worse, over the past decade, U.S. carbon emissions from electricity generation have actually been declining by more than twice the rate of Australia’s emissions decline.

A key lesson of the U.S. energy revolution is that resource abundance will only get the Australian economy so far. A variety of factors such as institutional arrangements, property rights, free markets, infrastructure development, and regulatory and policy settings must all play a critical role.

Only when Australia gets its institutional and policy settings right will the market be able to transform physical abundance into economic abundance and put downward pressure on energy prices and emissions.

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Feature Charticle

Australian and U.S. Industrial Gas Prices Since 2008

University of Sydney

Findings: 

  • Australia faces an energy crisis of high costs and lowered reliability.
  • The country must learn from the U.S. shale revolution that has cut both costs and greenhouse gas emissions.
  • Energy abundance is vital but it must be supported with sound policies.

Read the full study here