Page 5 - AsianOil Week 50 2022

AsianOil COMMENTARY AsianOil

the price caps and other price regulations will said. “The permanent regulation of gas prices
have the opposite impact, she said. through a mandatory code of conduct was done
Economic advisory firm ACIL Allen esti- without consultation and was rammed through
mated on December 16 that the decisions by parliament in a matter of hours. This should
the government would result in a 40% increase alarm Australia’s business community, which
in wholesale gas prices in Australia compared expects to operate in an open, market-based
with if there was no market interference. Over economy.”
the long term, already to ACIL, households Australian consultancy EnergyQuest
could end up paying an extra $175 annually on released a report earlier this month, warning
gas bills, while businesses would face a 40% hike that price regulation had hurt investment confi-
in costs. The price cap will also encourage con- dence, cut exploration and development activity
sumers to use more gas, at a time when demand and curtailed new supply, while disrupting gas
should be reduced. The Victoria state could face storage economics and making LNG imports to
blackouts, according to the firm’s report. Mean- the east coast unviable.
while, the short-term benefits “may be nil or very “Since coming to office, the government
minimal in the first instance,” the firm said. has consistently recognised natural gas as a
“It is this near-sighted, populist stance of the key part of Australia’s cleaner energy future,
government that is at the heart of the industry’s backing up renewables in electricity, support-
concern,” McCulloch said. “For the sake of a ing manufacturing and providing a pathway to
potential, if any, short-term fix, the government a hydrogen industry,” McCulloch said. “We saw
has dismantled a market that was working to this important role in the recent winter when
deliver essential energy and that will play a coal and renewable generation faltered and
critical role in transforming Australia’s energy there was unprecedented demand for gas in the
systems towards net zero. It has undermined electricity market – with demand increasing
the confidence to invest in an industry central 55% relative to the year before. The gas indus-
to building Australia’s story of economic success try stepped up to ensure additional supply and
– one that has been looked on with worldwide keep the lights on and homes warm along the
envy.” east coast.”
McCulloch stressed the gas industry’s value, “The package of gas market reforms passed
noting it had invested hundreds of billions of on Thursday will only add to energy system
dollars that support 165,000 jobs today across pressures and limit the ability of the industry
the supply chain, while also powering millions to respond to future calls to boost supply,” she
of homes and businesses, supporting economic concluded. “The government now has unprec-
growth and providing cleaner energy to Asian edented control over the Australian gas market,
countries, helping them to reduce their coal use. and with this must come accountability and
The industry invested $473bn between 2010 and responsibility. When investments in needed
2022 alone. new supply are shelved and prices are higher, the
“But the government’s actions this week have government will have to explain why it ignored
severely threatened investment confidence,” she the warnings.” ™

Week 50 16•December•2022 www. NEWSBASE .com P5