Energy bills may be set to jump due to changing LNG export market, economist says
Energy bills could be about to rise significantly over the next few years, new research shows.
Domestic energy producers are connecting with wholesale exporters of gas as part of Australia’s transition to become one of the biggest exporters of LNG.
However, big multinational LNG companies are facing significantly higher costs, and those costs are expected to be passed on to local suppliers and, ultimately, Australian households.
This is the finding of report by Phin Ziebell, an economist with the National Australia Bank.
“The sheer volumes of gas that we’re talking about being exported from Australia now will put probably LNG in second after iron ore in the export stakes,” he said.
The report highlights how important LNG exports are to the national economy, a final necessary leg of what has been an extraordinary mining boom.
“We’ll have huge capacity to export gas overseas.”
LNG at a big price
Australia used to rely on local oil rigs and the gas that came from them but the way the nation sources its gas has changed significantly.
Now, huge multinational companies drill for gas and export it, exposing them to large international markets and the prices that come with those.
“If you cast your mind back to the 1960s, you look at what we were doing then and you saw the opening up of Bass Strait for gas and Melbourne is the biggest residential gas consuming place in Australia,” Mr Ziebell said.
“That gas was just going to be basically flared off, it was oil construction which drove it.
“So we had really, really cheap gas in south-eastern Australia for many years.
“Now when you compare that to the LNG export industry, where prices have tended to be quite a lot higher, bringing us into global parity in terms of prices is actually increased prices and the price pressure in the market.”
Mr Ziebell said forecasts indicate that higher gas prices on the wholesale market will translate to higher utility prices for people at home.
The NAB’s findings match up with a recent survey conducted by the Australian Industry Group (AIG).
AIG CEO Innes Willox said the survey found over half of CEOs expect their energy costs to increase significantly as early as this year.
“That tells us that we have a real problem when it comes to energy costs and energy affordability in Australia,” Mr Willox said.
He is calling for urgent policy action to insure Australians against rising prices.
“Energy is the emerging issue that government both at federal and state levels need to address with urgency,” he said.
But if lobbying doesn’t work, the experts said you can also reduce your household gas bill with reverse cycle air-conditioning and, of course, solar roof panels.