The Australian Competition and Consumer Commission (ACCC) has released the newest instalment of the Gas Inquiry 2017–20 Interim Report, which shows some of Australia’s largest and most prolific commercial and industrial gas users will pay more than $11/GJ for gas this year.
The ACCC has been warning for some time that high gas prices are a serious threat to industry on the east coast, with ACCC Chair Rod Sims cautioning last year that manufacturers would be forced to shut down or move away if things didn’t improve.
Speaking at the APPEA Conference in Brisbane last week, Mr Sims reiterated this message, pointing to this week’s news that Dow Chemical would close its Melbourne manufacturing plant as evidence.
“Commercial and industrial gas users have been telling us for some time that at those gas prices, their operations are not sustainable in the medium to longer term,” he said.
“Businesses that rely heavily on gas are increasingly likely to relocate from the east coast or wind up their operations.”
Businesses in Sydney and Queensland have also suffered, with RemaPak and Calypave both entering administration recently, citing high gas prices as a contributing factor.
“Many other manufacturers are close to making critical decisions on their future operations,” Mr Sims said.
“If wholesale gas prices do not soften, it is just a matter of time before they follow Dow, RemaPak and Claypave.
“If more businesses start to fail, pressure will inevitably ramp up again on governments to do more.”
Mr Sims has previously described the gas market as “dysfunctional” and said he had “absolutely no sympathy” for gas producers who had complained about the prospect of government intervention to bolster domestic supply.
Today, he called on gas companies to continue plans for exploration and production, and local governments to facilitate new gas projects.
“Producing additional gas in the south is likely to result in much better pricing outcomes for domestic gas users than transporting gas from Queensland or importing it through an LNG import terminal,” said Mr Sims.
“Therefore, I urge the producers to carry out the investment in gas production they planned.
“I urge state governments to play their role in providing access to gas resources by adopting policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions.”
The ACCC is currently reviewing the costs and margins of Australia’s three largest gas retailers – AGL Energy, EnergyAustralia and Origin Energy – with reports on this due in July.
The ACCC gas inquiry is due to finish in April 2020.
For more information visit the ACCC website.
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