‘Biggest energy crisis in 50 years’: East Coast cold snap ignites fears over gas prices

Manufacturing Australia, which represents major gas users including fertilizer giant Incitec Pivot and building materials supplier Brickworks, has also called on the federal government to invoke the Australian Domestic Gas Safety Mechanism (ADGSM), which would reserve a quantity of gas to be sold on the domestic market.

“The growing energy crisis on Australia’s east coast now demands an urgent and extraordinary response,” said Manufacturing Australia chief executive Ben Eade.

Treasurer Jim Chalmers at a press conference.Credit:Alex Ellinghausen

But the Australian Petroleum Production & Exploration Association, which represents gas producers, opposes the moves, pointing out that up to 90% of the gas market is covered by long-term contracts. “The rest is covered by smaller and more volatile spot price markets which for much of this year have been around 70% lower than those paid internationally,” he said. .

Asked at a press conference about the possibility of invoking the ADGSM, Treasurer Jim Chalmers told reporters he would not anticipate talks with other ministers.

“Rising gas prices are a serious challenge for our economy. This requires careful oversight from all of our regulators and appropriate consultation and collaboration on all of our options, and that is what we intend to commit to,” he said.


Coal and gas prices in Australia rose throughout the year due to the war in Ukraine which stifled global supply, a series of outages at Australia’s aging coal-fired power stations and even flooding that interfered with mining operations at some of these stations. invoked.

Pricing pressure has increased in recent days with a cold snap increasing heating demand on Australia’s east coast and the Australian energy regulator’s decision last week to raise the default cap prices that energy retailers can charge their customers in response.

Compounding the problems, Origin Energy told investors on Wednesday that it had encountered difficulties in sourcing coal for its Eraring facility in the NSW Hunter Valley, the country’s largest power station, and that it would be forced to source more expensive fossil fuel.

Lower output from coal-fired power plants on the east coast has boosted demand for gas-fired electricity, contributing to the sharp rise in wholesale gas and electricity prices.

Tony Wood, who directs the Grattan Institute’s energy program, said there was little the federal government could do in the short term to bring prices down. Longer term, its Rewiring the Nation policy — a $20 billion program to build new transmission infrastructure to connect new renewable energy areas and better facilitate the flow of electricity — is expected to bring more people online. renewable energy supply and reduce price pressures. But the project could take years, he said.

Even if the government chose to quarantine some export gas, Wood added, the measure could secure supply without significantly impacting prices.

A spokesman for the Australian Energy Council, which represents energy retailers and producers including AGL and Origin Energy, said triggering the gas reservation mechanism would be unlikely to address the causes of the high prices gas currents, which are the result of a series of and international factors.

“Plant outages, along with seasonal low levels of renewable energy, are contributing to the current energy situation, which will improve later in the winter through spring,” the spokesperson said. “There is no easy solution.”


Tennant Reed, senior national adviser to the Australian Industry Group, said household energy price hikes of at least 8-15% were already supported by the regulator’s default price hike last week. . It was likely that price would rise further in the months and years to come, he said.

Some customers of smaller retailers who did not have their own access to power generation would see prices rise even more, he said, noting that one company had told customers prices could double.

He said that in the current geopolitical climate and in the face of a global energy crisis, any move by Australia to reduce energy exports would not be welcomed by export customers.

He said government policies to improve transmission to incorporate more renewables, in addition to state government efforts to improve household efficiency and replace gas appliances with electric alternatives, such as that induction cooking and heat pumps were the right answers, but they would take years to implement.


In the short term, he said federal and state governments could consider subsidizing households hit hardest by the crisis.

According to its first estimates, if governments targeted the most vulnerable 10% of households and small businesses, such an effort would cost around $6 billion.

Woodside’s O’Neill said market volatility was proof that “our response to the climate crisis [could] trigger an energy crisis”.

“I’m afraid some of that is happening in Australia, where the hardening capacity has really gone down, there’s not as much hardening capacity as there has been historically,” she said. declared. “And so when coal-fired electricity goes offline, that means a lot of gas consumption and there just isn’t enough gas to meet that demand.”

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