​Impact of gas squeeze worse than carbon tax: new report

Economic modeling released by six industry groups today predicts multi-billion dollar losses due to rising gas prices.

Economic
modeling released by six industry groups today predicts multi-billion dollar
losses due to rising gas prices.

The
research, featuring six case studies and carried out by Deloitte, predicted
$118 billion in lost manufacturing output in the next seven years without
policy action, as LNG exports ramp up and local prices rise to approach parity
with exports,

According
to the Australian Industry Group – which released the report along with the
Australian Food and Grocery Council, Energy Users Association, Plastics and
Chemicals Industry Association, Aluminium Council and Australian Steel
Institute  – the impact would be hardest felt in Queensland, Victoria and
NSW.

The
predicted tripling of gas prices would also be “significantly larger” than the
projected impact of the carbon tax over the period.

“Gas
exports should be pure good news for Australia,” said Innes Willox from the Ai
Group.

“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.”

The
report, titled Gas Market Transformations – Economic Consequences for the Manufacturing Sector, assumed no policy changes from the current settings.

It
tipped 14,600 manufacturing jobs would be lost, as well as lost output of $34
billion in mining and $4.5 billion in agriculture.

The Australian reports that prices have doubled from their historic $3 or $4 per
gigajoule, and exporters have contracted to Japanese, Chinese and Korean users
at prices as high as $16 per gigajoule.

Those
who have released the research have called for the ACCC or Productivity
Commission to run an inquiry into the competitiveness of the upstream gas
market, as well as measures including the removal of barriers to gas production
and use-it-or-lose-it provisions for those saving supplies until these can
fetch a higher export price.

Two-tiered
pricing for local and export customers should also be considered, said Brian Green, chairman of the Energy Users
Association.

“One of the things we’d like to see is a distinction being
made between gas being supplied for the export market and gas that is being
supplied for the domestic market,” the ABC reports him as saying.

“When we say domestic market we mean industry, although
obviously it also has a flow-on effect right through to household gas
bills.”

To read the research, click here.

Image: pennenergy.com