Gas price rise could be ‘fatal’ for some manufacturers

NSW today, IPART will decide whether or not AGL and Origin Energy can increase
their retail gas prices by 20 per cent, with the effect of prices on industry
expected to be significant.

The ABC reports that major gas projects by companies including Shell, Santos and
Exxon Mobil will begin production this year, with the bulk of this to be
exported to gas-poor Asian countries.

will put upwards pressure on prices, with the Australian gas market to be
linked for the first time ever to Asian prices, where prices are nearly triple those paid here.

export means we’ll slowly approach the price the rest of the world is
paying,” Martin Jones from the Consumer
Utility Advocacy Centre told the ABC.

happened in other industries and now we’re seeing it happen with gas and other
resource sectors, so it’s something that will eventually spread across the

Paul Simhauser, the
AGL’s chief economist, predicted a severe impact for manufacturers.

“In a worst-case scenario you could see gas prices moving
from that sort of more recent $4 to $5 a gigajoule range to potentially $10 or
$11 a gigajoule, so virtually a doubling at the wholesale level,” he told AM this morning.

“For the manufacturing industries, and particularly those
who use gas as a feedstock, and in many cases there’s not a lot of substitutes,
it’s going to be a big issue if it forms a large part of their cost structure.

“Then moving from a $4 or
$5 price plus $1 for transport moving up to a $9 or $10 price that can in many
respects end up being fatal for manufacturers.”

Manufacturing Australia last month warned that 100,000 jobs and $28 billion in economic
activity could be lost without intervention in the gas market.



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