IEEFA says government needs to break up gas ‘cartel’

gas prices, gas pipelines, GSOO

The Institute for Energy Economics and Financial Analysis (IEEFA) has called on the Australian government to implement a gas reservation policy, saying households could save $270 per bill if the “government finally intervened and broke up the cartel”.

The claim is based on a new report from the IEEFA Towards a Domestic Gas Reservation in Australia, providing what the IEEFA says is an overview of Australia’s gas market “including the damaging effect increasing gas prices are having on Australian consumers, as gas sets the price for electricity in Australia”.

Report author Bruce Robertson says every household would save $270 per electricity bill if the government intervened in the market and set a gas reserve.

According to the report, the east coast of Australia is controlled by a handful of private gas companies that behave as a “cartel”, setting the price and the supply of gas to the detriment of Australian consumers.

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“Now that cartel wants to export Australian domestic gas, and then resell it to us domestically through five proposed import plants, at even higher prices again,” Mr Robertson says.

“Enough is enough. The government must intervene and stop this madness.”

The report argues the solution to excessively high gas prices is a full domestic gas reservation policy fixing prices at $5/gigajoule (GJ) on existing and future gas production.

The Australian Petroleum Production & Exploration Association (APPEA) has rubbished the claims in the report, saying it is flawed on many levels.

APPEA Chief Executive Andrew McConville says: “Firstly, gas does not set the price of electricity across the national energy market (NEM) in Australia.

“There are many reasons why Australia has electricity affordability issues, including that wholesale and retail markets are too concentrated; poorly designed regulation and policy have added significant costs to electricity bills.

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“In addition, while prices for new contracts have increased, average prices across the economy have not risen by nearly as much – the average price across the Australia economy in 2014 was around $US4/MMBTU and is now just over $US4.50/MMBTU.

“Prices for new supply have risen as a result of rising production costs and supply restriction caused by the impact of bans and moratoriums in southern states.”

APPEA also states in 2016, the ACCC’s gas inquiry report found: “Over time, reservation policies would reduce the likelihood of new sources of gas being developed, to the detriment of the level and diversity of supply for domestic gas users”.