Engineers wearing green body suits turn the valve of a gas pipe

The government has a “gas trigger” to keep supplies ashore and prices low. What would it take to pull it?

Gas prices are high and temperatures are low, meaning businesses and households face big electricity bills this winter.

The rising cost of gas and coal on the international market is an important cause, although Australia is a major world exporter of these two products.

The federal government has the power to intervene directly in the gas market to stimulate local supply, often referred to as its “gas trigger”.

But although gas users are pushing for price relief, the new federal government must first weigh many factors.

Why are petrol prices high in Australia?

As Europe weans itself off Russian gas and coal after its invasion of Ukraine, international demand for raw materials has increased dramatically.

Coal and gas prices here are determined by the global market, so any supplies needed outside of existing contracts are subject to volatile international spot prices.

Europe is moving away from Russian gas following the country’s decision to invade Ukraine.(PA: Dmitry Lovetsky/File)

And reliability issues at some local coal-fired power plants are also driving up gas demand, as gas-fired power plants are needed to step up and fill the gaps.

Australia may be one of the largest gas exporters in the world, but that doesn’t necessarily guarantee affordable domestic supply.

To finance the development of gas fields, resource companies must enter into long-term supply contracts from the outset.

This means that some countries are now getting gas from Australia at prices significantly lower than what can be bought here, thanks to their contracts.

In Western Australia, 15% of liquefied natural gas (LNG) available for export must be reserved for domestic use, which has been successful in keeping gas prices low.

But there is no such policy in the rest of the country, meaning eastern Australia has to import additional gas supplies – and is therefore exposed to international price shocks.

What can the government do to lower gasoline prices?

There is an emergency provision called the ‘Australian Domestic Gas Reservation Mechanism’ which, if used, would act similarly to WA’s gas reservation policy.

The mechanism was introduced by then-Prime Minister Malcolm Turnbull in 2017, giving the Australian government the ability to intervene, or use the threat of intervention, to see more gas conserved for domestic use. .

Treasurer Jim Chalmers, who has only been in the job for just over a week, is already wondering whether he will use the gas trigger to cut prices.

But he tried to avoid saying anything that might suggest such a decision.

“We’ve had general conversations with resource companies, but not about this in particular,” he said.

“Really, I just don’t want to pre-empt conversations with other ministers and with other interested parties, including regulators.”

Chalmers looks serious as he looks down, speaking from inside the
Jim Chalmers warned that gas prices pose a serious risk to the economy.(ABC News: Matt Roberts)

Why does the federal government not pull the trigger right now?

The mechanism can only be used in limited circumstances, and it is not clear that current price spikes would be enough to invoke it.

Resources Minister, the new Madeleine King, is expected to determine that there will be a shortage of gas on the market next year, not just high prices.

#government #gas #trigger #supplies #ashore #prices #pull

Leave a Comment

Your email address will not be published. Required fields are marked *