Gas prices fell significantly during the past year but prices were still higher than export parity according to a new report from the Australian Competition and Consumer Commission (ACCC).
Chair of the ACCC, Rod Sims said the report, Gas Inquiry 2017-2025 Interim Report, highlighted that the lower gas prices may not last and the risk of a supply shortfall remained.
Mr Sims said east coast gas supply was expected to meet demand this year, although a shortfall of as much as 30 petajoules (PJ) may arise in the southern States by 2024, and the broader east coast gas market faced the risk of a shortfall in 2026.
“It is concerning that the risk of a gas supply shortfall in Australia’s southern States continues, despite this having been a looming issue for some time,” Mr Sims said.
“There are new sources of supply and related infrastructure that could be brought online to avoid a potential shortfall,” he said.
“It is crucial that investment decisions are made now to ensure there’s enough supply, and to provide downward pressure on future price rises.”
Mr Sims said the fall in gas prices had been in part driven by record low oil and liquefied natural gas (LNG) spot prices exacerbated by the COVID-19 pandemic.
“We welcome the narrowing of the once-large gap between domestic and export parity prices, but despite some improvement domestic customers are still paying more than overseas customers,” he said.
“LNG producers have not provided an adequate explanation as to why this is the case, or why we should accept it.”
Mr Sims said the Report also provided, for the first time, analysis of suppliers’ pricing strategies, obtained under the ACCC’s compulsory information gathering powers.
He said preliminary analysis suggested that competition between suppliers had been a limited constraint on gas prices over the past few years.
“Suppliers appear more concerned by the threat of regulatory intervention,” he said.
“This is not the sort of behaviour you’d expect to see in a well-functioning competitive market.”
Mr Sims said the ACCC recommended that Governments facilitate greater competition between suppliers to encourage producers to bring gas to market.
The ACCC’s 139-page Report can be accessed at this PS News link.
