Home » Gas Prices in Australia: Why Are Prices So High?
Wholesale gas prices in Australia are way up from their 2021 level. For east coast markets, the average price for the second quarter of 2022 was AUD $28.40 per gigajoule (GJ), up 246 per cent year-on-year. This price broke the previous record, set in the September quarter of 2021, almost three times over.
South Australia and the gas gap
South Australia does not produce much gas, so it is mainly sourced from Victoria, Queensland and the Cooper Basin.
However, this is not the case for Western Australia. Gas bills remain cheap in this state. Western Australia produces more natural gas than any other state. It also exports the most. But, the state government forces the gas industry to provide 15 per cent of this gas to Western Australians. This industry makes a lot of money from gas exports. This allows them to provide cheap gas to locals. Yet, no such policy exists in the other states.
However, this industry was not globally competitive. Currently, the companies involved also supply the east coast of Australia with this same gas. But, these gas companies set the domestic price above the international prices. They do this to make money back on their investments in the export industry.
Land clearing for coal seam gas pipeline, Queensland
Natural gas exports and the climate cost
Besides the effect on prices, gas exports also have a climate cost. Natural gas mainly consists of the greenhouse gasmethane. It warms the climate much more than carbon dioxide in the short term. Methane leaks all along the supply chain. These leakages occur more when the industry prepares natural gas for export and transports it.
High gas prices in Australia mean both households and industry have turned away from it. Australia’s use of gas fell by 21 per cent from 2014 to 2020. The decline of gas-powered generation has driven this. Renewables produced 24 per cent of electricity generation in 202o. On the other hand, gas produced just 20 per cent. That is because gas cannot supply electricity as cheaply as renewable energy.
The cost of batteries to store renewable energy has dropped quickly. There are now several large battery projects in Australia. Energy utility companies have announced plans to close coal-fired power stations. Rather than gas, they will replace them with renewable-energy storage batteries.
But, while Australia mobilises to clean up its energy, the government continues to support new gas projects for both domestic use and exports.
Wind farm near Ararat, Victoria. Renewables are cheaper and cleaner than gas.
Will a gas-led recovery reduce prices?
The government wants companies to find and produce more gas in Australia. It says gas companies could then provide cheap gas to Australians. The problem is eastern states do not have cheap gas left. For example, there is a planned coal seam gas development at Narrabri, NSW. The costs of the gas for users will be no lower than AUD $8 per GJ, according to analysts. Other developments will be expensive due to the transport costs. One example is the Northern Territory’s Beetaloo Basin shale gas fields. They are far from the main gas users in southern Australian states.