Explained: why gas prices jump in winter

Just when you need to stay warm, your gas bill tariffs start to soar.

Why gas producers slug you

It is a painful fact of life for consumers that in a free-market economy, when demand for a resource goes up, so does its price.

Thus, if you use gas to warm your home in winter, you can bet your bottom dollar that your bill will be higher for two main reasons: your usage increases and so does the tariff.

Despite the Federal Government this year seizing some limited control over supplies from the privatised liquefied natural gas fields off Australia’s northern shores, you are still likely to pay more, rather than less, to stay toasty.

Until the Government moved, gas exporters were bleeding domestic supplies dry, leading to fuel shortages and bumper pricing. But while a supply crisis has been averted, don’t expect the gas retailers to pass their wholesale savings on to you.

AGL has announced that household gas customers in NSW can expect a 1.8 per cent price hike, while South Australians will pay 2.1 per cent more.

There will be no change in gas prices for Queensland customers, and Victorians have been spared until 1 January.

Origin, uncharacteristically, has decided to cut or put on hold gas prices for customers.

From time to time, gas prices will rise for reasons other than demand and supply. The bill you pay comprises five parts: wholesale market price; distribution; transmission; retailer component; and environmental policy.

Between 2012 and 2015, government regulation over carbon emission standards pushed up the cost of doing business for gas producers. They responded by passing the cost on to consumers.

The component of gas bills made up by the wholesale price has doubled in the past five years, in most part because of competition for the limited supply in the domestic market. The downstream consumers – that’s you – also carried this extra cost.

Distribution costs as a percentage of your gas bill have also been steadily increasing over the past 10 years. This is partly due to extensions of the pipeline network to cater for the growing urban sprawl around many capital cities.

Transmission and retailer components have remained fairly steady over the past decade.

With energy policies and fuel supplies often considered volatile landscapes, there is no real certainty that prices will stabilise any time soon.

Already there are warnings that gas supplies to the east coast of Australia are threatened by mature reserves (at the end of their productive lives), which are depleting.

On the flipside, if government policies change to wind back the banning of coal seam gas extraction onshore, Australians could find themselves awash with the fuel. However, with farmers and other land and water users opposing such mining because of the pollution risks, this is not going to help gas prices fall any time soon.

Do you use gas to heat your home? Do you limit the amount of gas you use in winter to avoid high bills?

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    COMMENTS

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    James
    22nd Aug 2018
    10:19am
    What about WA?? We are part of Australia.
    pedro the swift
    22nd Aug 2018
    10:32am
    When, oh when will the governments of this country begin to realise that the needs of this country and people should come before the interests of others. DO NOt allow export of ANY resource until our internal needs have been met. That will ensure that we have a adequate supply for ourselves.
    Any sensible person knows that you only sell your excess produce not your stock you will need yourself.
    jackie
    22nd Aug 2018
    1:47pm
    Governments govern less and profit from privatisation and companies ripping us off. Governments operate like corporations where peoplevdo not matter. People will never be happy with lazy and greedy Governments that don’t care for the people. NZ is lucky to have a Government that does and has even taken a pay cut to prove that.
    GeorgeM
    23rd Aug 2018
    11:28pm
    Exactly, pedro, quite simple really, however the Govts here have not been run by sensible people, and the people keep voting for them!!!

    "Federal Government this year seizing some limited control over supplies from the privatised liquefied natural gas fields off Australia’s northern shores" - comment noted as it is frequently claimed by this Govt that they reduced Gas prices by this action - just another lie as I wrote to them listing prices which have risen in every bill over the last 2 years! However, they should do such interventions a lot more.
    Nerk
    22nd Aug 2018
    11:46am
    And they left out the bit where bulk gas sales to china is .02cents per litre whereas lpg to cars and bbq's is around $1.00, so who's the suckers?
    Rosret
    22nd Aug 2018
    12:18pm
    There was a time in Australia when it was considered fair and just for everyone to be able to afford the utilities and basic food produce.
    Our successive governments followed the American economic plan and the division between the wealthy and poor magnified as it has in the USA.
    The one difference is that the wealthiest individuals in the world are American. We Australians sold our resources to the highest off shore bidders like fools receiving trinkets in exchange for land and resources.
    Rae
    23rd Aug 2018
    8:36am
    Yes something the Americans never considered doing. While whining about wages employers and governments here have managed to create the highest electricity prices in the world and a lot of profits are used to subsidise Chinese manufacturing as our grid won't even keep the few smelters left running.

    And the lowest sale prices of gas to foreigners anywhere.

    In any other age it would have been treasonous behaviour and the government would have fallen already.
    pedro the swift
    22nd Aug 2018
    12:34pm
    I guess we can now appreciate how the natives feel after getting a handful of beads and some blankets for selling off their land.
    Rosret
    22nd Aug 2018
    1:23pm
    Yep.
    micko
    22nd Aug 2018
    1:59pm
    Yes Olga, I do limit the amount of gas I use to heat my home in winter. I turn it off !!!! and come live in Asia for 6 months where I pay cheap rent, buy cheap food and don’t run a car. I am also able to keep active swimming and walking as opposed to being holed up inside my house making the gas company richer.
    Rae
    23rd Aug 2018
    8:38am
    Great idea. If everyone who could do that did it would serve the businesses right.

    I've a Caribbean Island and a Greek Island I'm fond of where the costs are a fraction of Australia's. It's a great idea thanks.
    pedro the swift
    22nd Aug 2018
    2:11pm
    Well thats brilliant, micko.Maybe we should all take your lead and leave here during the winter. Maybe you could shout a few people the air fare.
    I guess it would make for an interesting scenario, Half the country flies north for the winter. Maybe the migrating birds have got it right, they don't apy any gas bills.
    micko
    22nd Aug 2018
    2:59pm
    Yes Pedro, you can do it. The money saved on utilities, petrol, food etc easily covers a cheap flight to Asia. Just gotta do your homework.

    22nd Aug 2018
    4:38pm
    Yep basic economics
    And as long as labor and greenies oppose more gas exploration and production, prices will rise
    Serve those voting labor and greens right
    You reap what you sow
    GrayComputing
    23rd Aug 2018
    8:09am
    I much prefer Offshore Gas and LNG where there is NO destruction of farm lands and pollution of water tables and so should you.
    On land fracking and coal scheme burning is horrible and is done by the greediest fracking robber barons and coupled with slack wimpy government legislation (yes bribes) is destroying parts of Australia farming areas for ever.
    Rae
    23rd Aug 2018
    8:45am
    The deals were poorly done and there is nothing to suggest any increased capabilities in the deal makers now.

    Of course Barnaby is keen to make a packet from that Pilliga property isn't he. Shonks and carpetbaggers all over the place.

    They could destroy the whole place and we still wouldn't' manage to sign a win/win deal.

    Yes make foreigners and a few deal signers rich and destroy the farmland. We can eat the crap the Chinese won't .

    You certainly do reap what you saw and the LNP have been doing the sowing for a very long time indeed and there is no crop at all to show for any of it.
    Blossom
    22nd Aug 2018
    8:26pm
    I have a Solar with Gas back-up Hot Water Service. The water in the pipes is much colder in the pipes in Winter and takes longer to heat, even if your HWS is supposed to be "instant heat".
    Rae
    23rd Aug 2018
    8:47am
    Out on the farm Dad had a coiled black water pipe on the roof above the shower that heated up and allowed a hot shower through the day. It was a neat system that cost nothing but a bit of pipe.
    GrayComputing
    23rd Aug 2018
    8:02am
    WA's vast LNG industry is supplying the world gas by shipping LNG in huge tankers.
    WA can easily ship cheap LNG to the east coast but only if someone can bothered to build LNG tanker terminals near each capital, like Japan's Tokyo has for WA's LNG gas.
    Tell your east coats pollies to pull their finger out and build LNG terminals today.
    Rae
    23rd Aug 2018
    8:49am
    Didn't the LNP destroy our maritime industry as part of their we hate unions and workers who want good wages plan? I'm pretty sure they used Legislation and sales of Ports ect to destroy any Australian shipping ability.
    ex PS
    25th Aug 2018
    12:00pm
    The government of the day had help from the Farmers who donated millions to the cause. That money would come in handy now to feed livestock.
    ex PS
    25th Aug 2018
    11:56am
    Easy, they do it simply because they can.


    Tags: energy, money, gas