Gas Market intervention a warning for Australian Industry

To address Australia’s energy crisis, new laws were passed in the parliament yesterday but the Australian Petroleum Production & Exploration Association (APPEA) warned could affect investor confidence.

The measures are expected to cut $230 from power bills next year.

The laws cap gas at $12 a gigajoule, introduce a mandatory code of conduct for the gas market, and roll out power bill support for welfare recipients.

The APPEA said these measures would also smash investor confidence and undermine Australia’s reputation as a secure and stable investment destination.

APPEA said these investments are delivering essential energy for Australian households and manufacturing, but the policy uncertainty created by these ill-considered interventions puts future investments at risk.

APPEA Chief Executive Samantha McCulloch said the industry had worked with the Government to guarantee supply into the east coast domestic gas market, including through a Heads of Agreement backed by a voluntary Code of Conduct.

“We share the Government’s objective of ensuring that energy prices remain affordable and support targeted relief to households and businesses. Sustained high domestic energy prices are in no one’s long-term interest.,” Ms McCulloch said.

McCulloch,” But this intervention in the market will have the opposite effect of that intended. Price caps and ongoing regulation of prices will undermine the case for investment in new supply and ultimately lead to higher prices and greater problems down the track.”

The Australian Chamber of Commerce and Industry also expresses concern over heavy-handed market intervention that will reduce incentives for supply and investment, creating bigger problems down the road.

“The global energy crisis, partly as a result of the invasion of Ukraine, is impacting on the Australian economy, stifling business confidence and competitiveness, particularly in the manufacturing sector,” ACCI chief of policy and advocacy David Alexander said.

“We are concerned about the establishment of price caps because they reduce incentives for supply and investment and create larger problems over time.” He added

Alexander was concerned that the mandatory code of conduct in which the government determines ‘reasonable prices’ would be a significant impairment to the efficient operation of the market and would further deter future investment.

Finance Minister Katy Gallagher said the measures would help to lower the cost of rising energy prices, which had been driven up by the war in Ukraine.

The Greens and the crossbench voted with the government to pass the laws through parliament before Christmas. 

In exchange for their support, the Greens secured a commitment from the government to provide help in the next budget for households and businesses transitioning from gas to electricity. 

Greens leader Adam Bandt sought an amendment to freeze power bills for the next two years by increasing taxes on gas and coal companies but was unsuccessful.

The St Vincent de Paul Society welcomes the agreement by the Albanese Government and the Greens for next year’s budget to include a package to help electrify the homes of low-income people.

‘This package will help low-income people and renters improve the energy efficiency of their homes and lower their utility bills by moving from gas to electricity,’ National President Claire Victory said.

Shadow Treasurer Angus Taylor said Family budgets will be clobbered with soaring energy bills this Christmas despite Labor claiming its energy legislation will provide relief.

“The government's rushed energy package will come as a cruel hoax to the millions of Australians who took the Prime Minister at his word when he promised a solution to this crisis before the end of the year,” Taylor said.

The Australian Workers' Union is urging people to take note of the doom-laden predictions of the gas industry and the Federal Opposition so they can be contrasted with reality.

AWU National Secretary Daniel Walton says these predictions should be carefully noted so they can be compared to reality as it unfolds.

"Here's my prediction for what will happen as a result of this apparently terrifying new legislation: the price of gas and coal will fall, consumers will feel relief, and the manufacturing industry will gain the confidence to keep operating and investing in Australia," he said.

Walton said the multinational energy exporters, who are currently hyperventilating and feeding the Opposition's talking points, will continue to make massive profits. The world will keep turning. Australia's orderly transition to a clean energy future will continue.

Last week, EnergyQuest released an analysis showing gas price caps would lead to damaging economic consequences including higher prices after investor confidence was hit and future supply was reduced as investors went elsewhere.