In a time when household budgets are stretched thin and the cost of living is a growing concern, Australians are looking for ways to save on their essential services. The Coalition’s newly unveiled energy strategy could be a beacon of hope for many, promising to reduce household gas bills by 7%. This plan, which focuses on establishing a domestic gas reservation on the east coast, is also projected to lower industrial gas bills by 15%.
The strategy, backed by modelling from Frontier Economics, suggests that new domestic gas supplies could be priced between $9 and $10 a gigajoule. This comes after some scepticism from experts who questioned the efficacy of government market intervention in driving down prices. However, the Coalition’s release, timed with the first leaders’ debate of the election campaign, is part of a larger set of energy commitments aimed at reducing electricity costs in the lead-up to the proposed construction of nuclear reactors by the late 2030s.
Peter Dutton, a key figure in the opposition, has championed the policy as a ‘game-changer’ in the face of volatile international energy markets. He argues that by compelling gas companies to prioritise the Australian market over exports, not only will gas prices drop, but this will also have a cascading effect on the costs of electricity, construction, food, and other goods.
The modelling predicts a 23% reduction in wholesale gas prices and a 3% decrease in residential electricity prices. The proposed mechanism for achieving these reductions involves a gas security charge—an export charge that would make it less financially attractive for producers to export gas, thereby encouraging them to sell domestically at competitive prices.
Under the Coalition’s proposal, east coast gas producers would be mandated to supply an additional 50 to 100 petajoules to the east coast market. This ‘gas reservation’ aims to lower the average price from the current $14 a gigajoule to $10 by the end of the year. The plan addresses the fact that most of the gas produced on the east coast is currently exported, with only a portion supplied to domestic users.
The Frontier Economics report suggests that the scheme would prevent producers and exporters from charging domestic users international export rates, leading to more stable and lower prices over time. Danny Price, managing director of the economic advisory group, emphasised that the arrangement would ensure gas buyers pay no more than the price in a competitive market, which includes a commercial rate of return for gas producers.
However, the Australian Energy Market Operator has warned of potential seasonal shortfalls in gas supply for the southern states by 2028, with annual supply gaps emerging from 2029. This raises questions about the long-term viability of the plan.
The gas industry has expressed concerns about the Coalition’s strategy, with Australian Energy Producers labelling it as a ‘damaging market intervention’ that could deter investment and worsen supply issues in the future. In contrast, the Albanese government has introduced a domestic price cap of $12 a gigajoule in 2023, along with other measures to encourage major gas producers to offer surplus supplies to the domestic market first.
The Australian Competition and Consumer Commission’s latest gas inquiry report reveals that average retail gas prices have decreased from $19.84 a gigajoule in 2023 to $14.51 in the latter half of 2024.
As the debate over the proposed gas reservation plan continues, it’s important to consider both its potential benefits and challenges for consumers and the broader energy sector.
What are your views on the Coalition’s gas reservation proposal? Do you think it will help reduce gas prices, or are there concerns that need further attention? Please feel free to share your thoughts and join the discussion in the comments below.
Also read: A closer look at Dutton’s National Gas Plan
