Gas supplies increased but still too expensive: consumer watchdog

Gas supplies increased but still too expensive: consumer watchdog

The Australian Competition and Consumer Commission (ACCC) says wholesale gas prices have fallen by about 50 percent since September, with a forecast shortfall turning into a potential surplus.

The largest commercial and industrial users - consuming more than one petajoule of gas a year - had received "substantially lower price offers than in early 2017" and had entered into agreements for 2018.

ACCC chairman Rod Sims said that while energy companies have acted to address a forecast domestic gas shortfall, the market remains challenging.

"Prices remain higher than they would be in a well-functioning and competitive market".

Forget export parity. We need fixed price domestic quotas for gas to offset the Curtis Island cartel or the next energy shock comes at the worst possible moment.

Small commercial and industrial users told the ACCC the prices offered to them by retailers had come down from around $18-19/GJ in the first half of 2017 to about $11/GJ or less.

While many users were delaying signing contracts at the previous high prices, a number of contracts have now been agreed.

"We're already seeing more gas being made available as a result of the intervention of the domestic gas market".

"I still think it is insane for Victoria, a traditionally strong manufacturing state, to be turning their back on their potential gas resources by imposing a moratorium on traditional, conventional development of gas", he told ABC radio on Wednesday.

"You've got a lot of commercial industrial customers making glass, bricks, paper, fertiliser - a whole lot of products we take for granted - if they didn't get gas by January 1, 2018, they (would have) had to close", he said.

"The gas shortfall in the southern states can add at least $2/GJ and possibly up to $4/GJ to the prices paid by gas consumers in these states".

Resources Minister Matt Canavan believes removing state government moratoriums on onshore gas exploration would not only increase supply, but protect manufacturing jobs.

"So that's more supply, lower prices and that's good news".

The $2-4/GJ for travel costs are on top of the exposure Gladstone's LNG producers have to the global LNG markets, which also put an upward pressure on prices. But the new normal will still be uncomfortably high for the foreseeable future for many of Australia's foundational industries.

This is the second interim report of this inquiry, which will operate for three years, with a final report due in April 2020.

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