Will Gas Prices Soon Be On Par With Electricity?

With Queensland’s huge LNG export projects set to start production next year, there is real concern that gas prices will skyrocket.

For some small businesses, this could mean a gas bill increase of $2,500 to $3,000. On the domestic front, high gas users in Melbourne can expect price rises of about $435 a year.

Even with this news, independent think tank, the Grattan Institute, is opposing calls for some gas to be reserved for domestic use. Instead, the report has recommended that governments consider raising tax and royalty rates on gas producers in response to rising prices.

Electricity and gas prices in Australian homes have already increased significantly over the past five years. But the completion of coal seam gas projects in Queensland is predicted to see gas prices more than double over the next few years, with local consumers having to pay the higher export price for gas.

Gas export production sparks fiery debate over WA’s “protectionism policy”

 

To avoid export price parity, Western Australia already puts aside 15% of gas reserves for domestic use.

However, Grattan Institute energy program director Tony Wood, said this “protectionism policy” has deterred investment and increased gas prices in WA.

Mr Wood’s analysis has been disputed by the head of WA's DomGas Alliance Matt Brown, which represents natural gas users such as Fortescue Metals and Alcoa.

He stated that 2013 was a record year for gas exploration investment and LNG exports. He also argued that the policy has not deterred big projects including Chevron's Gorgon and Wheatstone projects off the north-west coast of WA.

Scott McDine, the national secretary of the Australian Workers Unions and spokesman for the Reserve our Gas Coalition, also disputes the Grattan Institute's analysis.

After commissioning a report which found that one-in-five manufacturers could shut down because of skyrocketing gas prices, the AWU has called for a national gas reservation policy in line with policies implemented by other major gas exporting nations such as the United States.

Next few years difficult for gas users

 

With the Grattan report predicting that the cost increase will price gas out of power generation and lead to more coal being used for electricity, Tony Brown concedes that the next few years will be a difficult time for businesses and households, but added that he does not support government intervention, such as subsidies.

Source: http://www.abc.net.au/news/2014-10-20/gas-price-increases-no-cause-for-reservation-policy/5827098
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