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Gas price gouge continues, while exporters keeping siphoning southern gas offshore

The latest ACCC report on the east coast gas market has confirmed what Lock the Gate Alliance has long argued - that Australians are facing a gas price crisis, not a supply crisis.

The report, the seventh of its kind since 2015, found that in stark contrast to the rhetoric of gas addicted politicians like Federal Resources Minister Matt Canavan, supply was actually exceeding demand.

Lock the Gate spokesperson Carmel Flint said “This report indicates that supply for gas has increased and demand has dropped, but there has been little relief on gas prices for gas users, particularly in southern states.

“In fact, according to the ACCC, prices for commercial and industrial users are still almost three times historical domestic gas prices, at $10-12/GJ compared to historical prices of $3-4/GJ.

“It’s yet another clear indicator that the gas market is broken and that drilling new gasfields will do nothing to solve the problem.

“Perhaps the most disturbing finding by the ACCC was that the margins of the three largest gas retailers do not reflect costs under current market conditions, leading them to raise the question as to whether high prices are being caused by a lack of competition.  

“The report also reveals that conventional gas from southern states is still being transported to Queensland, undoubtedly for export via LNG terminals, and that this may affect supply to the domestic market.

“Overall, this report indicates that little has changed and that Aussie gas users are still being ripped off by a gas cartel shipping our gas offshore whilst creaming fat profits from keeping the price high here.

“This report strengthens the case for urgent action to amend the Australian Domestic Gas Security Mechanism to implement price controls as soon as possible.

“It’s clear from this report that approving new, dangerous gasfields like the Narrabri project in north-west NSW will do nothing to bring down gas prices, and will only harm land, water, and regional communities for a fuel Australians don’t need and can no longer afford.”

Key Quotes from ACCC report

“The supply forecast provided by gas producers and AEMO’s domestic demand forecast indicate that there will be sufficient gas produced in the Southern States to meet demand. However, the supply-demand balance in the Southern States for 2020 is tight and can be uncertain because it is subject to:

  • the quantity of gas produced in the south, particularly in the Cooper Basin, that will flow into Queensland, and

  • realised demand for gas from gas powered generators (GPG), which is difficult to predict

In the first quarter of 2019, the prices offered by retailers to C&I gas users in the East Coast Gas Market have remained in the $10–12/GJ range.2

Our most recent analysis shows that prices offered by gas producers in Queensland for 2020 supply appear to have fallen at the same time as this year’s decline in the expected LNG netback prices for 2020. However, it appears that the prices offered by suppliers in the Southern States, particularly by retailers, have not. The drivers behind this are unclear. 

“If margins were estimated on the basis of a retailer’s cost of acquiring additional gas and selling it under current market conditions, the margin for that specific gas would likely be lower.

“The ACCC will conduct further monitoring and analysis to better understand the extent to which high margins are being influenced by cyclical factors such as these and whether there are long term structural issues and a lack of competition.”

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