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Experts sink industry explanations for rising gas prices

CLAIMS developing the gas industry is needed to drive down gas prices has been hotly contested by the Australia Institute and the independent pricing watchdog.

NSW Energy Minister Anthony Roberts and the gas industry have both made the claims, with industry body APPEA saying energy costs will jump 20% in NSW because of a supply shortage.

But in a report titled Cooking Up A Price Rise, the Australia Institute said gas price rises are not being driven by a lack of supply, but by an increase in global demand.

"Once the eastern Australian gas market is connected to the world gas market, domestic gas producers will be able to sell at the world netback price - also known as the export parity price - which is substantially higher than current (domestic) gas prices," the report says.

This is backed up by a fact sheet on gas prices released last week by the Independent Pricing and Regulatory Tribunal.

Their strategy of blaming CSG restrictions for coming price rises is designed to turn public support against those restrictions and increase pressure on the ... State Government to remove them.

- Australia Institute report

"Retailers have proposed significant increases in regulated retail gas prices. These are largely based on rising wholesale gas commodity costs, as the development of the LNG export market in Queensland increasingly links domestic gas prices to international prices," the document says.

The wholesale price for gas on the eastern seaboard is around $4 per gigajoule. The world price is around $9, with the Asian price up to $19.

"Once gas suppliers have the option to sell to Asia, domestic consumers will have to match that," the Australia Institute report says.

Report author Matt Grudnoff argues Australia would not be able to meet the world market without the expanding CSG industry.

"Increases or decreases in domestic gas supply will have almost no impact on the price of gas," the report says.

"Once the eastern Australian gas market is linked with the world market, domestic gas prices will be subject to movements in the world price and domestic production will have little influence on price.

"With gas becoming far more profitable, it is not surprising that gas producers are keen to expand their supply.

"Their strategy of blaming CSG restrictions for coming price rises is designed to turn public support against those restrictions and increase pressure on the ... State Government to remove them.

"But these claims are little more than posturing and bear no resemblance to what is actually happening in the market."

Lismore-based Gasfield Free campaigner Aidan Ricketts.
Lismore-based Gasfield Free campaigner Aidan Ricketts. Scott Harlum

Lismore-based Gasfield Free campaigner Aidan Ricketts said he was "stunned by the temerity" of the industry and various politicians.

"They are trying to use price rises that the gas export industry is causing as a reason to try and frighten the population into allowing more dangerous gas extraction in NSW. They are using problems they are creating and trying to blame it on farmers and environmentalists," he said.

Mr Ricketts said if the government was serious about keeping prices down they should "stop the export industry so gas can be supplied domestically".

He said that was "probably unrealistic" and the alternative was to keep a percentage for domestic consumption, which was being done in WA.

"That would alleviate all of this panic built up around gas prices and allow cheaper gas to be provided for a domestic price."

Topics:  coal seam gas exports gas


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