Australia caps gas, coal prices
The Australian government has capped the price of gas and coal for a year in an effort to “provide targeted energy bill relief for households and businesses”, prime minister Anthony Albanese said on December 9.
“We are experiencing sustained and unprecedented pressure on global energy markets. Russia’s illegal invasion of Ukraine is pushing energy prices to historic highs all over the world,” he said.
“The urgent action we are taking with the energy price relief plan will shield Australians from the worst impacts of price increases, delivering responsible and targeted relief to families, small businesses and manufacturers,” Albanese added. “The plan is responsible, targeted and temporary.”
Gas prices will be capped at A$12/gigajoule (GJ), while the limit for coal will be A$125/metric ton for 12 months, with the government to contribute to costs. The government will establish an energy bill relief fund with up to A$1.5bn to deliver relief directly to electricity bills.
Australia’s peak oil and gas body Appea slammed the decision saying the energy reform package will push up gas prices for households and businesses after the intervention “smashes" investment confidence in Australia.
Appea criticised the lack of consultation with industry before the Australian government announced it was introducing the intervention of a gas price cap and mandatory code of conduct.
“A gas price cap will force prices higher for households and businesses because it will kill investment confidence and reduce future supply,” Appea CEO Samantha McCulloch said. “Less gas will ultimately mean higher prices while threatening Australia’s energy security, our emissions reduction goals and the enormous economic benefits that the industry delivers for Australians.”
“This heavy-handed, radical intervention has been conducted with no prior consultation with industry to consider specific measures and warn of potential risks to Australia,” she added. “Today’s decision is the opposite of what should have happened – the Government should be providing confidence to the market with positive policies that promote investment in new supply that can put downward pressure on prices and secure all the other benefits of having more gas production.”
Energy consultant EnergyQuest had earlier this month said that any potential price caps would not address the cause of high domestic prices - lack of new gas supply and volatility in demand from the electricity market with the transition to renewables. The long-term net effect of a price cap is to increase demand with lower prices, and decrease supply with lower economic returns – the opposite of what is required, it said.