The gas price debate is full of hot air, so let's use some economic logic to cut through.
The most basic principle of economics is supply and demand.
This is the basis of the Federal Government's preferred solution to Australia's surging domestic gas prices relaxing state restrictions on unconventional gas (such as coal seam gas, or CSG) to increase total production.
It seems logical until you consider this: the reason we have a shortage is because we are shipping the vast bulk of it to Japan, Korea and China, not because we don't have enough.
There are now seven, and soon to be 10, export plants liquefying gas and shipping it offshore.
If Australia simply produces more gas, it will find its way to the destination that pays the most. Right now, that's Asia.
But won't we be able to make the export dollars and produce enough to push prices down at home if we increase supply?
Again, it sounds logical until you consider how huge the export demand is, much of which is already locked in through export contracts.
According to the International Energy Agency, Australia produced 2,462 petajoules (PJ) of gas in 2014.
Australia will need to lift that total output by 50 per cent just to meet its expected exports in 2020, according to an ANZ analysis from 2015.
Domestic gas consumption and LNG exports Source: Department of Industry, Innovation and Science
Even if domestic consumption remains steady, the nation will need to more than double its gas output from 2014 levels to meet export and local needs if that's indeed possible.
A large part of the increase will come from massive, proven conventional offshore gas resources located in WA's North-West Shelf.
But the export boom is also relying on three giant liquefaction plants located near Gladstone in mid-north Queensland.
The Federal Government's response is get fracked.
Lifting restrictions on hydraulic fracturing of coal seams, or 'fracking' particularly in New South Wales — would boost output, taking pressure off prices, it argues.
Once again, it sounds logical. But where does the Government think that extra gas will go?
Now that the Queensland LNG plants are in production, the gas can simply be shipped offshore if the price is right.
It's a dollars and sense equation.
If overseas prices, minus processing and shipping costs, are higher than domestic prices, then the gas will be exported.
The only way prices would fall is if we engineer a gas glut where the LNG plants are at full capacity, and there's a surplus.
For Australian industry, it's another harsh introduction to the competitive pressures and costs its global counterparts have long confronted.
For households who have enjoyed several decades of falling real import prices for items such as clothes and electronics, its a lesson that globalisation doesn't always leave you better off.
