Gas prices set to triple, industry demands lifting fracking restrictions to keep them at bay

Image credit: freedigitalphotos User: Vichaya Kiatying-Angsulee

Six key industry groups representing the bulk of Australia’s manufacturing sector have called for a regulatory review of the gas supply industry as the boom in liquefied natural gas (LNG) exports is expected to triple domestic gas prices on the east coast of Australia — stripping nearly $160 billion and thousands of jobs from the manufacturing, mining and agriculture industry, according to the Business Insider.

Image credit: freedigitalphotos User:  Vichaya Kiatying-Angsulee
Image credit: freedigitalphotos User: Vichaya Kiatying-Angsulee

The Australian Industry Group, the Australian Aluminium Council, the Australian Food and Grocery Council, the Australian Steel Institute, the Energy Users Association of Australia and the Plastics and Chemicals Industries Association have commissioned forecasters Deloitte Access Economics to model the economic consequences of expensive gas.

The Deloitte report found that the impact of a tripling of gas prices to meet export parity was even greater than those associated with the repeal of the carbon tax.

It found that under current policy settings, the boom in LNG exports will lead to a loss of manufacturing output of $118 billion in net present value terms and a loss of 14,600 manufacturing jobs by 2021.

According to the Australian, the six major industrial energy users accused gas producers of withholding supply to wait for higher export prices, and called for an investigation by the Australian Competition & Consumer Commission or the Productivity Commission into joint gas marketing arrangements, the depth, liquidity and competitiveness of the upstream domestic gas market, and gas infrastructure.

The group has also urged the Government to remove regulatory barriers to new gas production and the mandatory development and use-it-or-lose-it provisions for commercial gas supplies to prevent producers withholding supply.

Australian Industry Group Chief Executive Innes Willox said it was a paradox that bringing Australia’s abundant gas supplies to market could have such a damaging effect on the manufacturing sector.

“Gas exports should be pure good news for Australia. However, the strong benefits for investment and export earnings come with serious side effects for domestic manufacturing: tight supply and surging prices. Without reform, our rich energy reserves will no longer contribute to Australia’s competitiveness,” he said.

“We need both a growing LNG export industry and a diverse industry base with a strong manufacturing sector. We need action on two fronts — get more gas flowing, by replacing blanket bans on gas production with strong but workable regulation; and reform the market that gas is sold in to boost competition and transparency.”

To keep gas prices down, the report recommends that restrictions be lifted from fracking including removing the Victorian fracking/CSG moratorium and the New South Wales CSG exclusion zones.