The Problem: Why are gas prices about to triple?
Until very recently, gas extracted in Australia stayed in Australia. Because our nation has abundant natural gas reserves, it meant our gas prices have stayed low by global standards.
Affordable gas has been a key national advantage. It has been a boost for Australian industry, especially manufacturing, which faces a range of challenges. Without affordable gas, many Australian manufacturing operations would be unable to survive.
Today, new technology has made it possible for Australian gas to be liquefied economically and exported, via ships, overseas. Multinational gas companies have been given licenses to extract Australian gas from major new gas fields and to export it, primarily to Asia. Exports of Australian gas will start ramping up from July 2015.
With exports now possible, gas companies will be able to attract the much higher Asian price for Australian gas. So while gas has cost approximately $4 per gigajoule in Australia, it can attract $15+ per gigajoule in Asian markets like Japan and Korea.
If gas companies have the option of selling Australian gas for $15+ per gigajoule, that’s the price they will charge everyone - including Australians. There is currently nothing to stop them.
This means Australian gas prices will shoot up by 300 to 400 per cent as existing gas agreements expire and new ones are negotiated. By way of comparison, the much discussed carbon tax increased energy costs by 14.5 per cent on average.
This price rise will hit household gas bills, small business gas bills, and major industrial operations.