End in sight for Australia’s fossil fuel revenue boom

Because Russia was a globally significant supplier of coal, oil and gas, the fallout from its invasion of Ukraine has had far-reaching consequences for world energy markets. Russia curtailed gas flows to Europe last year, while Western nations imposed rolling sanctions on Russian energy supplies to starve Moscow of the revenue it needs to fund the war, boosting demand and prices for spare cargoes across Europe and Asia.

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Despite accelerating global pledges to reduce fossil fuel consumption and help avert catastrophic climate change, the world’s coal use reached a record high last year, while Australian gas exporters, including Santos and Woodside, made more money than in any year in their history.

However, as short-term supply disruptions ease, the significance of powerful forces clouding the coal sector’s longer-term outlook will “resume focus”, the Industry Department says. “These factors include labour and equipment shortages, declining deposit quality, finance and insurance issues, and the ongoing global clean energy transition”.

In Australia and around the world, banks and insurers are increasingly abandoning the thermal coal sector because of the financial and ethical risks of contributing to global warming, pushing the cost of capital for coal miners higher.

The benchmark price of high-quality thermal coal traded at the Port of Newcastle is expected to fall by up to 66 per cent by 2025, from $US360 a tonne last year, to $US120 a tonne, the report says. Global supply and demand for thermal coal has passed its peak, it adds, while most proposed coal-fired power stations are being cancelled across the world.

Resources Minister Madeleine King said the Australian resources sector “continues to power the nation’s economy”, setting an export revenue record across the past financial year.

Australia’s mining sector contributes 13.6 per cent of gross domestic product, and directly employs more than 250,000 people.

King pointed to the bright outlook for Australia’s exports of many of the sought-after raw materials that will be needed in increasingly vast quantities in coming years to produce renewable energy, batteries and electric cars.

“Australia is well-positioned to supply long-term demand for base metals and critical minerals such as lithium, which are crucial components of clean-energy technologies,” she said.

Export earnings from metals used heavily in the energy transition have doubled since 2021-22, and are expected to remain above $40 billion a year.

Globally, Australia ranks among the top three countries by share of known reserves of copper, cobalt, lithium and nickel.

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