Home > ​Impact of gas squeeze worse than carbon tax: new report

​Impact of gas squeeze worse than carbon tax: new report

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Economic modeling released by six industry groups today predicts multi-billion dollar losses due to rising gas prices.

The research, featuring six case studies and carried out by Deloitte, predicted $118 billion in lost manufacturing output in the next seven years without policy action, as LNG exports ramp up and local prices rise to approach parity with exports,

According to the Australian Industry Group – which released the report along with the Australian Food and Grocery Council, Energy Users Association, Plastics and Chemicals Industry Association, Aluminium Council and Australian Steel Institute  – the impact would be hardest felt in Queensland, Victoria and NSW.

The predicted tripling of gas prices would also be “significantly larger” than the projected impact of the carbon tax over the period.

“Gas exports should be pure good news for Australia,” said Innes Willox from the Ai Group.

“However, the strong benefits for investment and export earnings come with serious side effects for domestic manufacturing: tight supply and surging prices.

“Without reform, our rich energy reserves will no longer contribute to Australia’s competitiveness.”

The report, titled Gas Market Transformations - Economic Consequences for the Manufacturing Sector, assumed no policy changes from the current settings.

It tipped 14,600 manufacturing jobs would be lost, as well as lost output of $34 billion in mining and $4.5 billion in agriculture.

The Australian reports that prices have doubled from their historic $3 or $4 per gigajoule, and exporters have contracted to Japanese, Chinese and Korean users at prices as high as $16 per gigajoule.

Those who have released the research have called for the ACCC or Productivity Commission to run an inquiry into the competitiveness of the upstream gas market, as well as measures including the removal of barriers to gas production and use-it-or-lose-it provisions for those saving supplies until these can fetch a higher export price.

Two-tiered pricing for local and export customers should also be considered, said Brian Green, chairman of the Energy Users Association.

"One of the things we'd like to see is a distinction being made between gas being supplied for the export market and gas that is being supplied for the domestic market," the ABC reports him as saying.

"When we say domestic market we mean industry, although obviously it also has a flow-on effect right through to household gas bills."

To read the research, click here.

Image: pennenergy.com

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