“The most disturbing feature of the ACCC’s latest gas market report released today is the sense of inevitability around high gas prices flowing back from export markets to every gas user in Eastern Australia,” Innes Willox, Chief Executive of the national employer association Ai Group said today.
"The low spot gas prices seen in 2020 were a blip driven by an unprecedented collapse in global oil and gas prices. Now those global prices have more than recovered, as extreme heat leads to extreme electricity demand for air conditioning across the Northern Hemisphere. Summer will end and price spikes will ease, but East Asian prices are likely to be elevated for years to come.
"The ACCC’s work and the Federal Government’s policies fundamentally accept that high export prices should drive high domestic prices. By contrast Japan’s recently announced plans to halve the role of LNG in its power sector by 2030 could wind up putting more downward pressure on Australian gas prices than any Australian policies – for any industrial gas users still around to see it.
"We do have to make the most of policy reforms to lift the transparency and competitiveness of our gas markets and ensure fair dealing and good faith. But energy users and governments need to look to demand side measures as well. Lifting efficiency and shifting to other energy sources, from hydrogen to electrification, will become more and more important as the gas price picture darkens.
"The possible shortfall in gas supply for next year that was identified in the report, is easily resolved and hopefully temporary. Exporters need to commit to offer sufficient gas into the local market in 2021, as they promised to under the Heads of Agreement which they signed in January. If they do not, the Government can and should respond to a forecast risk of shortfall by invoking the Australian Domestic Gas Security Mechanism, which was designed for just this limited purpose.
"From 2023 gas import terminals will ease the risk of actual shortfalls, though it will be a race between the decline of existing conventional gas production off Victoria and the construction of import terminals,” Mr Willox said.
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