Gas Reservation in Australia Will Lead to Price Distortion

Calls for a moratorium on new LNG developments or the reservation of a proportion of gas for domestic consumption in Australia will lead to distorted price signals, inefficient industries, lower investment and, ultimately, higher prices, Grattan Institute has said in a report.

“For years local prices have been low by world standards, but when suppliers can get a higher price exporting than on the domestic market, the domestic price has to rise,” said Grattan Institute Energy Program Director Tony Wood. “These demands for intervention are all pleas for protectionism," he added.

The report titled Getting gas right: Australia’s energy challenge also said that New South Wales should urgently resolve the impasse over coal seam gas and ensure that infrastructure is built and the gas flows into the system.

Governments should also move to create a more transparent and competitive market by accelerating the development of gas trading hubs, introducing a published price index, freeing up trading in pipeline capacity and more tightly constraining joint marketing arrangements by gas producers, the report said.