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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Written by Olga Galacho

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