Governments around the world had to crack down on profiteering from the energy crisis sparked by the war in Ukraine. Ben van Beurden is smart enough to have seen that, even if his fellow industry leaders and the federal opposition in this country are not.

“You cannot have a market that behaves in such a way … that it’s going to damage a significant part of society,” said van Beurden, the outgoing global head of the oil and gas supermajor Shell, at an industry event in London on October 4.

“One way or another” governments would intervene to claw back some of those super profits. There was room for discussion about the best way to do it, he said, but it was “inevitable”.

“We just have to accept [that] as a societal reality,” said van Beurden.

There has been no such acceptance by the Australian industry. Fossil fuel companies in this country are used to getting their way, bullying and buying off governments with donations and lucrative post-politics jobs for legislators and political advisers. In no other developed country do they, and the broader resources sector, wield as much economic and political power as they do in Australia.

So when the Albanese government had the temerity to propose legislation to cap gas prices – action that would somewhat crimp the extraordinary profitability of the industry and provide some slight relief to consumers from crushing energy price rises – the Australian fossil fuel industry responded in its usual way, with dire warnings and threats.

Samantha McCulloch, head of the industry’s peak body, the Australian Petroleum Production & Exploration Association, said the government’s proposal amounts to “a fundamental dismantling of the Australian gas market. It will do the opposite of what’s needed and will destroy investor confidence in bringing on new supply and that’s the key to bringing down prices.”

Woodside chief executive Meg O’Neill said, ominously, “No one wants to see energy shortages and gas rationing.”

And on Tuesday we learned, via a story in The Australian Financial Review, that Shell was putting on ice negotiations to supply 50 petajoules of gas to east coast customers in 2023 and 2024. Woodside promptly did the same.

“That is a supply strike – overtly withdrawing capacity from the market,” says Tim Buckley, director of Climate Energy Finance. “And Woodside doing it, knowing that Shell’s doing it, is collusion – albeit tacit collusion, conducted through the AFR.”

The gas lobby also threatened to fund a major public campaign against the move.

Such strongarm tactics have worked before. In 2010, warning it would see investment dry up, the resources sector ran a $22 million campaign against the Rudd Labor government’s proposed mining super profits tax. It succeeded in neutering it. In 2013, the fossil fuel lobby threw its weight behind the Coalition, led by Tony Abbott, and its promise to scrap Labor’s carbon pricing mechanism, which had proven successful in cutting our greenhouse gas emissions. The Coalition won, the Labor scheme was abolished and emissions shot up again.

Two big fights, two big wins for the miners and big losses for the environment and government coffers. Labor has steered clear of super profits taxes and carbon trading schemes ever since, despite the fact that they are widely viewed by experts as the most efficient ways of addressing the respective problems of climate change and profit gouging by resources companies.

Given this history, the industry perhaps expected it could prevail again, and deter the Albanese government from proceeding with its plan to cap prices for gas and coal. It was particularly vehement in its opposition to the proposal for legislation to peg the gas price at $12 per gigajoule for a year and to establish a mandatory code of conduct to force gas to be sold at “a reasonable price” thereafter. The bill also committed $1.5 billion to subsidise electricity bills for households and small businesses.

But the industry was wrong. Not only did its campaign against the government’s measures fail, but it also looks to have been  counterproductive to its long-term interests.

The Coalition parties’ determination to oppose Labor’s plan resulted in the government having to negotiate with the Greens to get the measures through the senate. The price of Greens support was that Labor commit more money to measures – so far undetailed –to encourage households to replace gas appliances with efficient electric ones, and to speed the transition to renewable energy.

At this point the gas companies’ fight for the right to gouge customers seems to be going about as well as Vladimir Putin’s invasion of Ukraine.

And we probably would not be having this fight but for Putin’s invasion, the global energy price shock it caused, and the enormous windfall gains that accrued to fossil fuel companies. To cite just one, entirely typical, example of those enormous windfalls, van Beurden’s company, Shell, reported net income of just over $30 billion for the first nine months of this year, almost two-and-a-half times the $12.8 billion it booked in the same period in 2021.

Australia is the world’s biggest exporter of gas, and the value of liquefied natural gas exports increased from $30.5 billion in 2020-21 to $70.2 billion in 2021-22. Over the same period, the average price of exported gas rose from $7.50 to $16.20 per petajoule. As the Australian Competition and Consumer Commission has noted, this involved virtually no increase in the cost of production. Likewise, the global energy crisis has pushed up the price of coal. New research this week from The Australia Institute found coal export revenue was $112 billion in 2021-22, an increase of 186 per cent on the previous year.

The report by the institute calculated that windfall profits to coal companies in 2021-22 were between $39 billion and $45 billion. Some $13 billion–$23 billion of that was “directly attributable to the Russian invasion of Ukraine”.

The federal government also has won agreement to cap the wholesale domestic price of coal at $125 a tonne. That will require action from the major coal-producing states, New South Wales and Queensland – and, in the NSW case, legislation – but the coal cap was not part of this week’s federal legislation.

Let’s focus on that. The first thing to note is that the political and economic problem posed by sky-high energy prices is far from solved by the passage of the cap on gas prices.

The October budget forecast electricity prices to rise 56 per cent over two years. The price caps will have no impact on this year’s 20 per cent rise, and the government’s modelling forecasts next year’s rise to ease only modestly from 36 to 23 per cent – although the subsidies will soften the impact for low-income households and small businesses.

The second point is that the government is on pretty firm political ground when it argues that households and businesses should not be paying anything near global prices for resources that belong to the people of Australia.

A Guardian Essential poll last month found 67 per cent of respondents favoured intervention to curb price rises. Perhaps more tellingly for the Liberal and National parties, many of their traditional backers in business also approve of the government’s actions. The Australian Industry Group (Ai Group), for example, which represents some 60,000 businesses, welcomed the legislation.

Andrew Richards, head of the Energy Users Association of Australia, congratulated the government for having been prepared to “stand up to the bullies of the gas industry”.

“They bully governments, they bully their customers, they bully regulators and it’s time someone stood up to them,” he said.

A third point is that by the estimations of most independent energy experts, the $12 cap on price was generous and the suggestion by the companies that they would be forced to curtail operations was disingenuous.

“They say they’re not going to expand exploration, they’re not going to search for gas and so on,” says Bruce Mountain, director of the Victoria Energy Policy Centre. “But they were happy to do that at prices half their current spot price level. So what’s changed?”

Bruce Robertson, gas analyst with the Institute for Energy Economics and Financial Analysis, says the industry would remain “hugely profitable” under the $12 cap.

“Most of their profitability comes from offshore, anyway. About 72 per cent of gas on the east coast of Australia is exported. So the key determinant is not what’s happening in Australia, it’s what’s happening offshore. At the moment these companies are making a bundle of money there,” says Robertson.

“And when you look at their costs – at $12 a gigajoule, the gas companies don’t make profits, they make super profits. The average cost of gas on the east coast of Australia is about five bucks to produce.”

Robertson has seen this movie before, back in 2006, when the Western Australian government determined it would implement a gas reservation policy, to ensure the companies kept sufficient supplies for domestic use. As a result of that policy, the gas spot price in the west averaged $5.54 for the June quarter this year.

“When they introduced domestic gas reservation in WA, you know, the companies basically went into the minister’s office and said, ‘We’re never going to invest in this state again.’ But they did.”

Most experts agree, though, that while the federal government needed to act, it has gone about it somewhat clumsily. A neater solution to the problem would have been to target profits, not prices.

That’s what governments have done elsewhere in the world. That’s what van Beurden advocated for in October, when he addressed the Energy Intelligence Forum in London. Even as he spoke, more than a dozen European nations – and many others around the world – had either implemented or announced they would implement a windfall profits tax.

“A windfall profits tax would potentially be a much more long-lasting solution to this problem,” says Alia Armistead, a researcher for the climate and energy program at The Australia Institute.

“It would be a preferable way to capture this excess profit, to ease pressure on households from being stuck with high energy prices. It could go towards fast-tracking the transition towards renewables and building out the huge amount of transmission and new generation that will be required to achieve Labor’s renewable energy target by 2030.”

As the Ai Group said, the next year or so looks “messy” on the energy front. And there are no doubt valid criticisms to be made about the government’s policy. But they are not the ones being made by the gas industry.

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