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APPEA hits back at IEEFA

Earlier this month, the Institute for Energy Economics and Financial Analysis (IEEFA) released Towards a Domestic Gas Reservation in Australia, which suggested big gas producers in Australia had been taking advantage of customers and the solution to bringing down prices was a full domestic gas reservation policy fixing prices at $5/GJ.

The Australian Petroleum Production and Exploration Association (APPEA) has hit back at the claims in the report, particularly the view that Australia’s high electricity prices are caused principally by high gas prices.

“Gas does not set the price of electricity across the national energy market in Australia,” said APPEA Chief Executive Andrew McConville.

“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.

“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.”

Mr McConville said IEFFA included misleading information in the report about Australia’s gas prices compared to other countries, citing a recent survey by the International Gas Union (IGU) which found Australia paid below the average amount in comparison to Asia.

Additionally, Mr McConville said Australia needed to follow the leads of countries like Canada and the US where the gas markets set wholesale prices, rather than enact a gas reservation policy.

“These nations do this for a good reason; gas reservation actually makes worse the situation it’s supposed to fix,” he said.

“A domestic gas reservation policy would act as an implicit tax on Australian gas production that diminishes incentives to invest in future gas production and exploration.

“The best way to create downward pressure on gas prices is more gas, not more regulation.”

The Federal Government is currently investigating ways to decrease gas prices on the east coast, where customers can currently pay up to $7 more than in Western Australia.

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