Australian energy bills could surge as Iran conflict drives up global gas prices | Energy
US-Israeli attacks on Iran risk a repeat of the 2022 energy shock that sent electricity bills soaring by more than 40 per cent, driving Australian businesses to the wall and forcing governments to spend billions of dollars on electricity bill subsidies.
The stark warning from experts follows reports that Qatar, the third-largest exporter of liquefied natural gas, halted production after Iranian drones attacked the sprawling Ras Laffan complex on Monday.
The decision caused global wholesale gas prices to rise by 50% in Europe and close to 40% in Asia; This is reminiscent of the global energy chaos unleashed by Russia’s invasion of Ukraine four years ago.
US-Israeli missile strikes have already blocked ships in the Strait of Hormuz, through which about one-fifth of the world’s seaborne oil and gas passes.
Kevin Morrison, an LNG and gas analyst at the Institute for Energy, Economic and Financial Analysis, said: [on global markets] There was a much more dramatic increase than the oil price.”
“The market is saying they fear the impact will be much greater for gas than for oil,” Morrison said.
Australian wholesale gas prices have tripled in the last decade; this coincided with the start-up of major LNG export terminals in Queensland; This tied domestic prices to the more expensive and unstable international market.
Following Russia’s invasion of Ukraine, national household gas and electricity prices increased by 27% and 43% respectively in the period to March 2023, while gas prices for producers increased by 46%.
So far there is no evidence that the conflict in the Middle East is beginning to be reflected in Australian LNG and domestic gas prices. But Morrison said there were similarities between what was happening now and what happened four years ago.
“We have a major global gas supplier out of action, so the threat is there. We were heading into a period where gas prices should have fallen, but the features of a prolonged rise in prices are now there,” he said.
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The government has announced a domestic gas booking scheme that will force LNG exporters to reserve up to a quarter of their gas for domestic use, but this is not due to start until early next year.
But for now, “we are very, very exposed to international prices,” Morrison said.
“We could start to see gasoline prices rising domestically and that’s reflected in electricity; there’s a strong correlation. If you combine that with rising gasoline and diesel prices, we get an overall increase in energy prices.”
A spokesman for resources minister Madeleine King said steps taken by the Albanian government, such as the $12/GJ fair pricing mechanism under the gas market law, “protect the domestic market from excessive price increases such as those occurring as a result of Russia’s illegal occupation of Ukraine”.
The spokesman noted that the domestic gas market is estimated to be “well supplied” in 2026, but “the government continues to monitor the situation.”
“The recently completed gas market review will enable the Albanian government to secure more affordable gas for Australians, better protect businesses from international price increases and put the industry on a stronger footing when it comes to negotiating gas contracts through the introduction of a domestic gas reservation scheme.”
But Tony Wood, senior researcher at the Grattan Institute’s energy and climate change programme, said the steps the government had taken in recent years had not completely broken the link between global and domestic gas prices.
“What’s happening now is going to put huge pressure on the government to act much tougher, not only to keep the domestic market supplied, but also to make sure prices don’t reflect crazy international prices,” Wood said.
“When this happened in Ukraine, many people thought it would be a short and sharp war, but here we are, four and a half years later.
“Just when everyone was starting to think we might see LNG prices drop, maybe they won’t.”
