Permanent price caps risk gas supply shortfalls, industry warns

The gas industry has launched a pre-emptive strike ahead of the federal budget, warning continued intervention on prices will have dire consequences.

In a shot across the bow of the federal government, the gas industry is warning any attempt to permanently regulate prices will lead to more uncertainty, increasing the risk of supply shortages and higher costs for consumers, as it calls for “an open, market-based economy”.

The Australian Petroleum Production and Exploration Association, in its submission to the federal budget to be released on Monday, said the government’s temporary price caps had “an immediate and devastating impact” on the operation of the market and warned against future interventions.

In its submission it says it had a chilling impact on investment in new gas projects, which could have increased supply for domestic customers.

Australian Petroleum Production and Exploration Association CEO Samantha McCulloch

APPEA boss Samantha McCulloch said both the recent price cap and the proposed mandatory code of conduct for the government essentially let the government determine gas prices.

“This – along with ongoing legal hurdles and delays for new oil and gas projects – create significant uncertainty and make investors nervous to allocate new capital to the sector and the economy,” she said.

“The government should take note of the lessons from the price cap implementation when considering permanent regulation of gas prices through a mandatory Code of Conduct.

“It would send a positive signal to investors to recommit to an open, market-based economy.”

Treasurer Jim Chalmers has previously pointed to treasury analysis of ASX data which showed power retailers were paying up to 44 per cent less per megawatt hour, compared to prices before the cap came into effect.

Treasurer Jim Chalmers says price caps are already working.

He said at the time that it was evidence that the government’s plan was already working to limit prices rises for consumers.

The Australian Energy Regulator is expected to release its default market offer for power prices in the week beginning March 13, which will be consumers first look at what impact the price caps have had on their bills.

The gas and coal price caps, implemented as a temporary measure in additional sitting of parliament in mid-December, created clashes between the Albanese Government and the resources sector.

APPEA is also urging the government to provide clear support for carbon capture and storage technology as a way of reach net zero emissions by 2050.