"For more than five years Ai Group has highlighted the risks involved in the transformation of the Eastern Australian gas market. Those include not only higher export parity pricing, but also the risk that the surging export gas demand combined with disappointing production growth leads to a serious shortfall that drives prices well above international levels.
"That fear is now becoming the reality. Gas users are being offered prices three times higher than their last contract, and five times the historic average, leading them to rethink planned investments. Businesses that were looking to return production from China are now considering further off-shoring. Major players and the energy market operator have concluded that there simply isn’t enough gas in production to meet all demand in the next few years. And the gas issue is greatly worsening price hikes and supply fears for electricity, adding further pressure to industry and households.
"A gas summit with producers is an important step, but it is only the start of fixing this critical issue. Energy users are also central. And State Governments in New South Wales and Victoria, who have banned many forms of gas development, are also responsible for finding solutions.
"Affordable, reliable and clean energy supply must be the number one priority for federal and state governments. Without action on gas there will be massive demand destruction that will claim thousands of jobs.
"Governments need to work with industry on creative solutions for the near term. Voluntary arrangements should be possible to swap gas between domestic and export customers, given the large volumes available on global spot markets. Industry creates jobs and economic development in Australia, and needs a strategy that will deliver now and be sustainable over the longer term to fix a crisis that has been a long time in the making," Mr Willox said.
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