Australia's Future in Gas
Australian households may face higher gas prices in the future as international demand for the product increases worldwide.
The issue is not that the country is not producing enough gas, but that the export price is driving up what Australian consumers need to pay for the item, according to the Grattan Institute.
Local prices have been low by international standards but the high export price is what gas suppliers are expecting the domestic market to match.
The Asian market, in particular, is experiencing high demand for Australian gas, according to Tony Wood, Grattan Institute Energy Program director. He says Australians may face an increase in gas prices of up to $170 a year.
In a report entitled 'Getting gas right,' Mr Wood said Australia is set to be the second largest exporter of liquefied natural gas (LNG) by 2015 and may even outrank Qatar by 2017 to be the largest.
The domestic and international markets for Australian gas have remained separate until now, so households have been charged at a lower rate than the price received by exporters.
However this is all set to change when the domestic and international markets connect, which will begin once the East Coast starts exporting LNG.
Export gas terminals have been approved in Gladstone and Australian gas consumers will pay the price, according to Australian Industry Group CEO Innes Willox.
"And it's Australian industry which has for a very long time had a competitive advantage when it comes to energy prices, now having to pay global prices for a resource that we own here in Australia," he said in a speech on October 22.
One way to resolve the issue, he said, would be to reserve acreage for domestic use only, or alternatively to implement 'use it or lose it' programs where producers who are not using the land for its intended purpose in gas mining, will no longer be entitled to use the areas.
If terrain is set aside for domestic use only, it may affect the nation's economic welfare, according to a Deloitte Access Economics analysis.
The amount of gas set aside in the reservation may be more than what would be consumed in the free market, which would result in an excess for manufacturers.
Suppliers then might be less inclined to invest in developments in the area, so total supply could drop.
Ultimately, industry experts agree that there needs to be some form of action to address the issue of high gas prices in the domestic market.
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