With the US and the UK banning oil, Moscow warns that the price of oil may reach $300 a barrel in the event of a ban on Russian exports

Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.

I am Leon Gettler. My job is to review and monitor      the week’s news in business, finance and economics. I bring it all to you, every week.

This is episode number 6 in our series for 2022 and today’s date is Friday March 11.

First, I’ll be talking to Pete Neal Founder and CEO of Powerpal, an Australian-developed app that is changing the way Australians use energy in their homes, slashing bills and reducing household carbon emissions in the process.  The app has so far reduced CO2 emissions by 21,388 tonnes and helped Australians save $6,955,723, since November 2020. And I’ll be talking to economist Nicholas Gruen about what can be done to isolate Russia’s economy.

But now, let’s talk to Pete Neal.

With Moscow threatening to cut off gas to Europe and warning oil prices could surge to $US300 barrel if western nations ban exports of Russian, Britain has joined the United States in banning Russian oil amid petrol price spikes that have sparked panic buying of fuel in both nations. Most global markets are in turmoil as Putin’s attack on Ukraine has triggered a flight to safety among global investors. The top 14 worst-performing markets so far this year are all from the European region with Russia topping the list.  Wall Street also had its biggest drop in more than a year as another leap for oil prices threatened to squeeze inflation’s grip on the global economy.

Russia’s invasion of Ukraine and the tough sanctions that have followed have sent oil prices soaring to their highest levels since July 2008. They’ve also crushed hopes of a strong global rebound from the coronavirus crisis. The conflict has got Wall Street analysts talking about investors’ worst nightmare: stagflation. Stagflation is a mixture of high inflation and a stagnant economy. It was the defining economic term of the 1970s, a decade in which the US entered a crushing recession, but inflation nonetheless soared above 12%. The stagflation of the ’70s shocked economists. Up until then, the consensus was that inflation would cool when the economy slowed, because fewer people would be wanting to buy goods and services. Now, it has the potential to shock investors.

Shell will phase out all purchases of Russian oil and gas, with an immediate halt to crude deals on the short-term market, making a dramatic U-turn in response to international opprobrium over its dealings with the country. The invasion of Ukraine prompted a huge range of companies to withdraw from their operations in Russia, including energy giants BP and Exxon Mobil. Attention has now shifted to the country’s energy exports, a crucial source of revenue for President Vladimir Putin’s government. 

Tough financial sanctions against Vladimir Putin’s Russia may affect a larger share of the Australian economy than first thought, new research shows. While Australia’s economic relationship with Russia is insignificant, equating to just 0.2% of total trade, new research from data analytics firm Purpose Bureau says the impact of tough new trade restrictions sparked by the invasion of Ukraine could be felt acutely by close to 1000 small to medium-sized unlisted businesses with close links to Russia. Australian businesses are prohibited from dealing with close to a dozen Russian banks and are now banned from exporting certain goods, including items used for oil and gas exploration and production. Purpose Bureau used natural language processing to scan websites, media and administrative data for 1.1 million Australian businesses and identified 948 unlisted companies with significant operational exposure to Russia. Firms qualified as having ongoing operational exposure if they had an operating entity in Russia, a physical office or store in Russia, or provisioned goods or services to Russian customers. Purpose Bureau chief executive Nick Kamper said the companies identified were mainly involved with providing support services for industrial and agricultural production and Russia’s oil and gas industry, which is the subject of tough sanctions. Almost 37% of the Russian-linked firms are based in either Queensland or Western Australia, despite the resource-rich states making up just 29% of the Australian economy. Over the course of 2021, Australia exported about $821 million worth of goods and services to Russia and imported $453 million.

Brookfield and Mike Cannon-Brookes are still pursuing ambitions to take over AGL Energy, despite walking away from being rebuffed on their close to $9 billion takeover proposal, contacting shareholders on Monday to garner support and stoke doubts about the board’s alternative demerger plan. The move is being seen as a tactic to undermine AGL’s demerger proposal, potentially setting it up to fail, at which time the bidding partners could pounce. While Mr Cannon-Brookes took to Twitter to declare it was “pens down” on the takeover bidd the consortium might re-emerge with another bid given uncertainty among shareholders over the demerger plan. It remains in talks with several of the company’s investors. The 10% increase in their proposed offer, to $8.25 a share, has also been enough to convince some AGL shareholders that the board should change tack and engage in discussions or open up the company’s books, amid doubts about the viability of the plan to split the company. Investors are piling pressure on AGL Energy’s board to demonstrate that the proposed demerger of the company can deliver more value to shareholders than what has become the “plan B” scenario. At least one institutional investor in AGL met senior management late on Monday to ask them to open up their books to the bidding consortium, but got the message that they were holding firm to their view that the revised offer was still not high enough to take that step. Several major shareholders said AGL may have been too hasty in its approach, given uncertainties around the company’s own demerger scheme, and exploratory talks with the high-profile suitors may have been a better path for the 180-year-old operator. Brookfield and Mr Cannon-Brookes seem to be biding their time before potentially pouncing again when AGL’s board may have been weakened by unrest about the demerger. The demerger needs approval from 75% of shareholders.

BHP expects a slowdown in global economic growth amid accelerating inflation and surging commodity prices with the fallout from Russia’s invasion of Ukraine further dampening the outlook. The world’s largest miner in February originally forecast a 5% expansion for world economic growth but on Tuesday trimmed that forecast by 0.5%, partly due to massive jumps in raw material prices which have rattled global markets.

Australian exporters could secure new LNG export contracts for existing and new projects to Europe over the next few years as the region seeks to avoid a long-term gas crunch. LNG prices have soared in recent weeks, hitting a six-month high recently, as importers scramble to source new supplies to reduce their dependence on Russia. While analysts see little scope to immediately expand sales to Europe, which is at most risk of soaring prices, Australian shipments could climb over the course of the next few years.  “With the European crisis, the demand for Australian LNG is likely now to be even greater, which is an opportunity to win more contracts for current new projects. Woodside should be able to contract more of Scarborough and Santos more of Barossa,” consultancy EnergyQuest said in a report published on Tuesday. While Europe is expected to be in the market for additional LNG supplies, EnergyQuest said the gas crunch bought about by sidelining Russia would be keenly felt in Japan. The dilemma could lead to Japan being required to outbid Europe for Australian supplies, forcing up prices. New demand for Australian supplies comes as work is under way on two major projects. Woodside late last year gave the go-ahead to the $16.4 billion Scarborough project, which is set to be the biggest fossil fuel development in Australia for almost a decade and has been the subject of growing environmental opposition. The Scarborough project – holding about 11 trillion cubic feet of gas – would lock in another 30 years of LNG exports starting in 2026, when shipments are due to start from the expanded Pluto site near Karratha. Santos last year gave the go-ahead for the $US3.6 billion ($4.7 billion) development of the Barossa gas field off Australia’s northern coast. The project, which will supply 20 more years of gas for the 3.7 million tonnes-a-year Darwin LNG project, is Santos’ first major growth investment since the oil price crash a year ago that brought major development projects to a halt. The LNG boom has also stirred speculation of old projects being revived. Woodside’s Browse venture off the Kimberley coast and its Sunrise project in Timor-Leste could be dusted off and reconsidered, as well as an expansion of Santos’ Darwin LNG plant.

Queensland’s major flood will cost taxpayers up to $2.5 billion and knock $1 billion off the state’s economic growth, according to Treasurer Cameron Dick. As the Insurance Council of Australia said the flooding in south-east Queensland and northern NSW had resulted in $1 billion in claims so far, Mr Dick said the natural disaster would cost billions to rebuild key infrastructure, including roads and bridges. The Queensland Reconstruction Authority – which was established to help rebuild after natural disasters such as cyclones – will once again be called on to help coordinate rebuilding of key infrastructure. While the Queensland floods did not cause as much damage as previous events like Cyclone Yasi, preliminary estimates by Treasury predicted it would take 0.25% off gross state product.

More than 2000 homes and businesses in the state’s inundated Northern Rivers have been declared unliveable and NSW Premier Dominic Perrottet warned the recovery will take years as the true extent of the disaster becomes clear. Two out of three flood-affected homes in Lismore, which bore the brunt of last week’s historic weather event, will need to be demolished and rebuilt, or substantially repaired, before they can be inhabited, while more than 200 schools across the state remain offline. The NSW floods have also prompted Deputy Premier Paul Toole to call for a reassessment of where housing developments are permitted across the state, saying the government needed to ensure people were not settled in the path of potential natural disasters.

In a report published on Monday, Energy Networks Australia – which represents the country’s grid – says the threat of a changing climate poses a significant risk to Australia’s security, and immediate action is needed. The release of the report comes as Australia’s east coast reels from the extreme weather that caused devastating flooding across Queensland and northern NSW which Energy Australia said are a stark illustration of the threat of changing climate. Energy Networks Australia said the cost of building network resilience would be expensive, and it recommended a local approach to improving grid stability that considers the most likely climate change-induced weather events. Australia’s east and west coasts are susceptible to heatwaves and cyclones. The threat is different in other parts of the country. Each weather event poses different threats to the grid, Energy Networks Australia said. Bushfires cause increased line sag, damage to infrastructure and the inability to access facilities for repair, which could result in prolonged power outages. Heavy rain and flash flooding also damage infrastructure, and in extreme cases there might be mudslides and soil erosion, exposing buried pipelines and cables. Less well-known impacts include dust, solar radiation and airborne particles that Energy Networks Australia said have the capacity to disrupt power supply.

The winner of a looming federal election should look to nearly double Australia’s emissions reduction target by 2030 and develop a national strategy to deal with coal exiting the power grid faster than expected, a major business group said. The Australian Industry Group, which represents 60,000 businesses, has told politicians the nation’s current goal for cutting pollution should be extended to 50% by 2030 to ensure the country does not slip behind its main international trading partners to meet mid-century net zero targets. Scott Morrison has committed the country to net zero emissions by 2050 but has not budged on lifting its 2030 goal for a 26-28% reduction on 2005 levels, although government forecasts show it expects to reach a 35% cut by that time due to more renewables coming online and low emissions technologies. Labor has opted for a 43% cut by the end of this decade if it wins at the next election, expected in May. The Business Council, representing many of the country’s biggest emitters, in October said Australia should almost double its 2030 emissions target to between 46 and 50% to achieve net zero by 2050, citing modelling showing the shift to a clean economy would boost GDP by $890bn and add 195,000 jobs over the next five decades. The Ai Group’s demands for greater ambition forms part of its pre-election policy statement on energy and climate, two areas that have at times proven treacherous for both major political parties.

The Commonwealth Bank is predicting overheated house prices will plunge in Sydney — and across Australia. Median house prices in the Harbour City have spiked 23% in the past year, but could drop nearly $200,000 by the end of 2023, analysis by the Commonwealth Bank shows. The bank’s dwelling price projections predict the median house price across Australia will drop by 8% in 2023. This includes a 3% drop this year and a 9% fall next year in both Melbourne and Sydney.

A judge has ordered billionaire Clive Palmer to pay a hefty legal bill after he dropped a $2m lawsuit against an aircraft repair company over alleged damage to his private jet. Federal Court Justice Bernard Murphy ordered Mr Palmer to pay indemnity costs for PremiAir Aviation Maintenance, meaning the billionaire will cover all the company’s expenses in defending the lawsuit. Justice Murphy said Mr Palmer should have to cover PremiAir’s “completely unnecessary” costs in defending the lawsuit because he made the decision to drop the court action. Mr Palmer decided to drop the lawsuit in December after arguing in a November 2020 email to PremiAir that the company had dismantled his Cessna Citation X aircraft for repair without his approval, which “constituted damage” to the plane.

And that’s it for this week. And next week I’ll be talking to Zaheer Jappie, the founder and CEO of Car Clarity, Australia’s first true car loan platform with an easy online application process. And I’ll be talking to economist Saul Eslake about the impact of the war in Ukraine on the Australian and global economy.

In the meantime you can catch me on Facebook, Twitter Instagram and LinkedIn. And if you want leave a comment.

Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.