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Gas

Are businesses impacted by rising gas prices?

Rising gas prices take their toll 171 78194 0 14099713 300

Gas prices are rising for most homeowners at the moment and latest analysis shows businesses aren't exempt from the trend.

Six industry associations have joined forces to assess the impact of rising gas costs and they've tasked Deloitte with putting the findings together.

Which sectors are impacted?

Various industries are feeling the sting of escalating gas prices, including manufacturing. The likes of transport, mining and agriculture are also bearing the brunt as the price of gas escalates.

The Gas Market Transformations - Economic Consequences for the Manufacturing Sector report suggests Australia's manufacturing output will contract $118 billion over the coming seven years.

This will result in 14,600 jobs being lost in this industry alone, suggesting action urgently needs to be taken to avoid the widespread negative impact on the economy.

Queensland, New South Wales and Victoria have all been earmarked as locations where significant declines in mining activity could be on the cards.

Mining is just as likely to suffer the effects, as it is forecast to contract by $34 billion over the seven-year period. Agriculture, on the other hand, is poised for a decline of $4.5 billion.

Phil Barresi, Chief Executive Officer of the Energy Users Association of Australia, said one of the biggest issues at the moment is that every company trying to secure a gas supply contract is already facing a rise in prices.

Not only this, they're faced with the issue of an uncertain gas supply and are unable to lock in any long-term supply contracts that could protect them against any further changes.

What can be done to cushion the blow?

Australian Industry Group Chief Executive Innes Willox explained how it's almost hard to believe that Australia's supply of gas could have such a negative impression on the manufacturing industry.

"Gas exports should be pure good news for Australia," he commented. "However, the strong benefits for investment and export earnings come with serious side effects for domestic manufacturing: tight supply and surging prices."

He suggested that one of the best solutions might be to offer greater support to the liquefied natural gas industry, which should be able to increase its rate of exportation.

The ultimate aim is for more gas to be flowing, which will involve "replacing blanket bans on gas production" and instead replacing them with more flexible regulations, Mr Willox noted.

There should also be a drive to promote competition and transparency, which could help improve the situation for gas suppliers and perhaps ultimately their customers as well.

Each of the six industry associations involved in this report has asked local governments to take action alongside gas suppliers, consumers, pipeline operators and the community.

This will involve taking a closer look at the short and long-term impacts of transformation in the gas market and establishing any steps that need to be taken towards ensuring a reliable supply.

Any other solutions?

There's also the option to invest more heavily in renewable energy sources so the likes of gas don't have to be relied on quite so heavily.

A report released by Bloomberg New Energy Finance (BNEF) earlier this month found that $2.5 trillion will need to be invested in renewables across the Asia-Pacific region to meet the power capacity needed by 2030.

The BNEF 2030 Market Outlook explained how solar, wind and hydro-electric power are all likely to make significant contributions to the energy mix over the coming years.

Although fossil fuel and gas production is still expected to grow, sustainable energy technology will come to the fore and offer alternatives at a time when they are needed most.

Posted by Jeremy Elliott