Up 285%: Here’s how much worse the energy crisis could get

High wholesale energy prices were driven by unplanned power plant outages, extreme weather conditions, the conflict in Ukraine and increasingly “peak” demand. (Source: Reuters, Getty)

If smaller retailers cannot withstand soaring wholesale energy prices, Australia could face a less competitive energy market and higher prices in the future.

High world energy prices – caused by the Russian-Ukrainian conflict, unexpected power outages and a cold snap – pushed several small retailers on the edge of the abyss.

One Big Switch’s Joel Gibson feared these smaller retailers wouldn’t be able to weather the storm, which would reduce competition in the marketplace.

So far, only one commercial gas supplier has actually gone out of business.

However, half a dozen retailers warned their customers about the price hike, with one smaller retailer raising prices by 285%.

Four of those companies have advised their customers to go elsewhere, Gibson said, and two are “closing up shop” on new customers.

Gibson said there was a real risk that these retailers would go bankrupt under these conditions.

“With fewer retailers, there is less competition, and competition is good for consumers,” he said.

“It puts downward pressure on the markets and keeps bigwigs honest.”

He said ReAmped Energy — one of the retailers advising customers to shop elsewhere — had consistently been the lowest-priced retailer in four states over the past few years.

“So it’s a real loss for customers.”

Gibson said larger retailers were likely to be more resilient to price increases because they had their own powerhouses.

“Because part of their business is currently making money off of soaring black coal and gas prices, they might be able to subsidize their retail business to some degree and pass on the lower price hikes on customers,” Gibson said.

“It’s hope.”

Even major retailers are likely to raise prices due to market volatility, with Gibson estimating an increase of around 15-20%.

How much will energy cost?

Roberto Aguilera, an energy economist at Curtin University, said increased energy consumption, due to cold weather, combined with coal production outages, was putting strong upward pressure on prices. .

“Gas could normally replace coal, but it’s in short supply because much of it is under contract for export to Asia,” Aguilera said.

“Some of these countries are also experiencing shortages and high prices due to supply disruptions from Russia – gas markets around the world are interconnected, so when supply drops in one region, prices tend to increase everywhere”.

However, Aguilera said there could be price relief on the horizon.

“As the weather improves in eastern states and the northern hemisphere, and the global economy continues to slow, gas consumption is expected to decline,” he said.

He also said new gas projects are expected to come online in most producing regions, helping to boost supply.

“And, although Russian supply has slowed, it is unlikely to decrease significantly – Europe has no real substitute, while Russia depends on export earnings,” he said. -he declares.

He said the combination of all these factors should help push prices down later in the year.

What should energy customers do in the meantime?

Gibson advised energy customers to shop around if their retailer had raised prices.

He also recommended snagging one of the few remaining competitive fixed rates “because they are disappearing day by day.”

People could still save on variable rates, but he said they would have to keep changing to avoid the worst of the hikes.

“If you’re not willing to shop around and change, we’ve already seen that some people would get increases of over $1,500 a year for a typical household if they didn’t move.”

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