GAS PRICE TURNS UP THE HEAT
Supply concerns hit industry, households
Gas prices have hit a 10month high as supply disruptions across Australia’s east coast raise the threat of a winter energy crunch.
A surge in the price of gas will increase concern among manufacturers, who are the major local users, and leaves the country vulnerable to a repeat of the chaos last year when the energy market operator was forced to intervene to prevent blackouts.
Production issues at ExxonMobil’s Longford gas hub in Victoria and pipeline capacity constraints on the Moomba to Sydney pipeline that curtailed supplies to Sydney caused gas prices in Sydney to hit a high of $30/GJ late last week. Prices have fallen slightly, but remain close to the milestone.
While the increase will only immediately affect those without contracted supply agreements, the more immediate threat is a repeat of the conditions of last year that were triggered largely by a big change in the way the country uses gas. Gas in Australia is typically used as an electricity supply “peaker” – power stations fire up when demand is strong in evenings and on cold mornings. But with a spate of coal power stations offline in 2022, they were running around the clock.
Energy Edge managing director Josh Stabler said Australia would be susceptible to upheaval this winter.
“If we can keep gas in its lane, which is using gas for peak demand periods, then the market will have a better chance of riding out these issues,” he said. “We don’t have any planned outages for coal generators over winter but we know that Callide C (in Queensland) is offline and Liddell (in NSW) is gone so there is an elevated risk and potential impact of a broad requirement from gas in the electricity market.”
Any coal blackouts driving increased demand for gas will in turn increase prices, a hammer blow to heavy users and the federal government, which is under mounting pressure.
The federal Labor government last year introduced a cap on new gas developments after a campaign by small businesses struggling with surging prices and claims by Australian manufacturers they could not survive without government intervention.
The intervention has been criticised by developers, some of whom have delayed new projects that threaten to exacerbate a domestic shortage expected in 2025.
The Australian Energy Regulator last week approved increases for household bills from July 1 for much of the country by about 25 per cent.
The wholesale price was the largest driver of the increases, the AER said. Prime Minister Anthony Albanese has insisted his government did, however, limit further increases.
“We are doing our best to keep those costs down that was acknowledged last week by the energy regulator,” Mr Albanese said. “Our interventions have made a significant difference.”