What does the future have in store for gas prices?

Rising gas prices expected to take their toll 171 86541 0 14095118 300

Rising gas prices are a major source of stress for many Australian households and a new study from the Grattan Institute suggests this might not change any time soon.

Over the past five years alone, the group reveals how electricity prices have escalated 61 per cent in real terms for Australian consumers, while gas costs are up 36 per cent.

However, Grattan Institute estimates suggest that changes to the gas market could mean bills are increased by as much as $300 a year in Melbourne.

Sydney and Adelaide won't come away unscathed either, as bill rises of more than $100 a year are forecast, the report titled Gas at the crossroads: Australia's hard choice established.

Changing attitudes towards energy

Report authors explained how there are some barriers that are preventing people from bringing down their gas bills - and one of them is a reluctance to buy new appliances.

In many cases, people still prefer gas appliances and are worried about making the switch to electricity.

Other consumers don't feel they can justify the cost of changing all their household goods, or simply get confused by the amount of choice that's on offer.

Improving education could therefore be one effective step in helping consumers to combat rising bills and the potential threat of costs spiralling beyond their control.

Companies take a hit

Businesses look set to be affected as well, with manufacturing-based industries potentially among those who feel the impact more than most.

Food processing, as well as paper and packaging, are among those expected to bear the brunt of rising gas prices, which means action needs to be taken sooner rather than later.

"Governments are already coming under pressure to protect Australian industry and consumers from the price rises. They should resist it," noted Grattan Energy Program Director Tony Wood.

"Reserving or subsidising gas for domestic use will add more costs than benefits and do nothing to increase supply. And in the long run, protection harms everyone."

Struggling to combat climate change

The Grattan Institute also points to a potential rise in the amount of coal being used to generate electricity across the nation, which would have a negative impact on carbon reduction targets.

Australia is currently on track to meet its objective of reducing emissions by 2020, but alterations to the way in which the gas market operates could put this in serious jeopardy.

The aim is to lower greenhouse gas emissions by 25 per cent compared with levels recorded in 2000 by 2020 and by a total of 80 per cent by 2050.

There is a growing concern that gas-fired power will eventually become priced out of the market and will only be used when peaks in demand are necessary, again, possibly causing problems for climate change.

Driving higher gas prices

One of the primary drivers of higher gas prices is the export industry, which the Grattan Institute forecasts will be valued at around $60 billion a year by 2018.

This means household gas customers need to pay their suppliers the same amount they can achieve on the global market, therefore having a negative impact on their bills.

It's not just gas that people are worried about either, as the rising cost of electricity is also high on consumers' list of concerns at the moment.

Research carried out by Ernst & Young shows 55 per cent of energy customers have thought about switching electricity providers within the past 12 months to combat their rising bills.

One of the main triggers for this behaviour was receiving an unexpectedly large bill, which spurred a quarter of respondents on to think about changing to a new supplier.

Posted by Richard West