Home > Gas price rise could be ‘fatal’ for some manufacturers

Gas price rise could be ‘fatal’ for some manufacturers

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In NSW today, IPART will decide whether or not AGL and Origin Energy can increase their retail gas prices by 20 per cent, with the effect of prices on industry expected to be significant.

The ABC reports that major gas projects by companies including Shell, Santos and Exxon Mobil will begin production this year, with the bulk of this to be exported to gas-poor Asian countries.

This will put upwards pressure on prices, with the Australian gas market to be linked for the first time ever to Asian prices, where prices are nearly triple those paid here.

"The export means we'll slowly approach the price the rest of the world is paying," Martin Jones from the Consumer Utility Advocacy Centre told the ABC.

"It's happened in other industries and now we're seeing it happen with gas and other resource sectors, so it's something that will eventually spread across the economy.

Paul Simhauser, the AGL’s chief economist, predicted a severe impact for manufacturers.

"In a worst-case scenario you could see gas prices moving from that sort of more recent $4 to $5 a gigajoule range to potentially $10 or $11 a gigajoule, so virtually a doubling at the wholesale level," he told AM this morning.

"For the manufacturing industries, and particularly those who use gas as a feedstock, and in many cases there's not a lot of substitutes, it's going to be a big issue if it forms a large part of their cost structure.

"Then moving from a $4 or $5 price plus $1 for transport moving up to a $9 or $10 price that can in many respects end up being fatal for manufacturers."

Manufacturing Australia last month warned that 100,000 jobs and $28 billion in economic activity could be lost without intervention in the gas market.

Image: actiononcoalandgas.org


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