‘Nothing effective is being done’: Business warns PM’s cheap gas push is falling short

Source: The Age

15th July 2021

Australian manufacturers are warning the federal government is failing to deliver on its promise of a “gas-fired” recovery from COVID-19 as rising prices of the fossil fuel on the east coast put factories and jobs at risk.

Business and union leaders are demanding urgent market intervention in the hope of limiting further pain, including lobbying Canberra to quarantine an amount of gas supply that cannot be sold as exports.

In wholesale markets, which mainly affect smaller manufacturers, gas is trading at $20 a gigajoule in Sydney and Adelaide – up to three times higher than pre-pandemic levels – amid winter heating demand, reduced output from the Bass Strait gas fields and coal-fired power station outages.

In Victoria, spot gas prices have eased from an alarming $58 a gigajoule last week, but still remain high at $13.

“It’s like paying over one day what you would normally pay over one week,” said Aditya Jhunjhunwala, the director of NSW-based manufacturer Causmag, which buys gas on the spot market.

As the vast majority of gas on the east coast is sold via long-term contracts, not the wholesale market, Australia’s gas producers say runaway spot prices are “mostly irrelevant”.

But price worries are deepening for contract gas, too. Business groups say higher liquefied natural gas prices, which partly influence the price of local contracts, could soon start to bite, as Asian demand for cargoes of the super-chilled form of the fossil fuel sends benchmark prices to their highest levels since 2013.

“They won’t be hit immediately by spot fluctuations, but these acute surges and the chronic rise in gas prices are clearly going to hit new contracts,” Mr Willox said.

The Morrison government has made a priority of delivering more affordable and reliable gas in the hope of boosting economic activity and jobs as the economy recovers from COVID-19.

However, businesses and trade unions have begun formally pressing the government to do more, including pulling the trigger on the Australian Domestic Gas Security Mechanism, which would limit the amount of local gas that can be exported as LNG.

Tony Wood, energy director at the Grattan Institute think tank, said rising spot prices and LNG benchmarks “blows out of the water the government’s claims of a gas-led recovery”.

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