Households vulnerable to gas price surges

News posted on 12.08.2014 on Research & developement

Smh.com.au has reported (04/08/2014) on forecasts that gas prices are set to sharply rise in the east of Australia as Queensland starts exporting gas later this year. Much of the competitive position of gas over electricity will slide.

It is anticipated that domestic wholesale gas prices will match international levels. 

Projections, included in gas distributor Jemena's application to the Australian Energy Regulator, indicated that wholesale gas prices are set to double to $8 a gigajoule between now and 2018.  The price could reach $10 if transportation and other factors are included.

Jemena, indicated that it is willing to reduce charges which make up to half of a quarterly gas bill in an effort to limit a potential fall in gas demand as the wholesale prices increase.

The US has recently experienced a surge in gas production from so-called unconventional sources such as shale.  Prices of US domestic gas is around $4.50 per gigajoule.  Many US companies are now exporting their surplus to Asia and Europe.

Household gas prices in NSW have already risen 17 per cent from the start of July and there are concerns that prices will continue to rise over the next few years.

Jemena expects that the demand for gas will reduce per user so it is hoping to expand it's supply networks to reach more households to help offset any loss.

An analysis included in the Jemena application indicated that gas prices may rise by up to 20 per cent by 2018 with electricity prices to remain stable.

Households are left vulnerable to the impact of international prices as long term domestic gas supply contract held by energy utilities come to an end over the next 2 to 3 years.