Gas price rises, exports a growing concern, say members at industry discussion

A roundtable discussion held by a business newspaper has illustrated the disagreement between gas explorers and consumers on how the price of the resource can be brought down.

The Australian Financial Review’s and GE Australia’s Australia 2.0 forum on energy heard that thousands of manufacturing jobs are feared to be at risk due to rising energy costs, which some say will get worse when $60 billion of liquid natural gas projects come on-line in 2014-15 and east coast customers start having to compete with Asian export markets.

“Blind Freddy can see the supply and demand crunch that’s coming,” said Michael Fraser, the CEO of AGL Energy, accoprding to the Australian Financial Review.

“If against the backdrop of that you then have a government decide to sterilise resources, that can only have one impact in terms of the supply side.”

The Australian Industry Group has said that businesses are paying gas prices that have increased 57 per cent in the last six years, and other industry representatives, such as Manufacturing Australia, have warned of dire consequences without policy action.

Energy explorers have said that this would be counterproductive, and the market would be the best way to sort the issue out.

Peter Cleary, the vice president of strategy at Santos, said that the United States, currently enjoying growth in manufacturing frequently attributed to cheap energy prices due to the shale gas boom, is an example of the market bringing prices down.

“If you look at the US analogue there, they had price rises during the mid-2000s; the response to that was an increase in activity in bringing new gas on. We’re now seeing the benefits of that,” he said during the discussion.

“That’s a response to market forces. If you start to interfere with those then you’re picking winners and then you’re creating irregularities that a few years down the track you’ll try and unpick and you’ll cost yourself a lot of money.”

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