Gas costs hit price of food

MEAT, processed fruit and vegetables, and even tomato sauce are about to get more expensive as soaring gas prices hit home.

Energy and industry experts warn of a “rough few years” of high prices, largely because of the war in Ukraine, and some say the growing problem could require government intervention.

Energy Users Association of Australia chief executive Andrew Richards said many companies would have no choice but to increase prices when they got new gas contracts.

“Higher energy costs will continue to feed higher cost of living, and inflation, for some time to come,” he said. “For food processing industries, we are starting to see those increased costs reflected in the supermarket – processed vegetables, meat, tomato sauce.

“They use gas to heat a lot of water to create steam used for sterilising.”

The failure of gas retailer Weston Energy this week set business groups’ nerves on edge about what is to come, after exposure to “unprecedented” east coast prices of more than $40 a gigajoule – up from about $10 early this year – were blamed for its demise.

Mr Richards said gas market reform was needed and it could take strong intervention by government to save some sectors. “When you look at long-term issues in energy markets, it’s hard to see how it gets resolved in the near future, it’s going to be a pretty rough ride,” he said.

The Australian Industry Group’s climate and energy expert, Tennant Reed, agreed, saying it would be “a rough few years for energy prices on the east coast of Australia”.

Mr Reed said the effect of the war in Ukraine on coal and gas prices was largely to blame, because Russia was a major exporter of gas to European countries.

EU governments were now looking abroad to “soak up every bit of liquefied natural gas they can get”.

Australian companies competing against rivals in Germany, Japan or Korea – where gas is also highly sought after – might be insulated from major shocks but others that have fixed-price contracts or compete against other economies would face “acute squeezes”.

The forecast for more gas price pain comes after energy regulators this week approved big rises in electricity tariffs.

Australian Workers Union state secretary Ben Davis said gas woes would have to be addressed by the incoming Albanese government.

“We are very concerned about the future of some of our manufacturers,” he said.