ACCC reveals gas price surge as intervention looms

A five-fold jump in gas prices for large manufacturers may trigger an urgent government intervention to avoid a shutdown of factories.

Gas producers are on edge as the federal government mulls intervention in the energy market.

Large manufacturers are being offered gas contracts for 2023 at rates up to five times the levels being offered a year ago, with Labor warning that factories will shut down unless it makes an ­urgent market intervention to cut prices.

New data from the competition regulator shows one energy producer offered gas at an extreme price of $65 a gigajoule next year to industrial users while Australia’s big retailers have offered a dozen contracts between $30GJ and $40GJ, still more than triple the price from 12 months earlier.

Gas-reliant manufacturers say these price levels would send them out of business.

The Australian Competition & Consumer Commission, which handed advice on a range of intervention options to Jim Chalmers last Friday, disclosed the data to industry as part of its preliminary analysis before its gas market report is released in January 2023.

The ACCC data shows a steadily rising level of price offers in the months up until August, while the forward cost of gas ­production in one region of Queensland remained less than $10GJ. Offers made in November 2021 were close to $10GJ.

Federal Industry Minister Ed Husic said action needed to be taken, with Labor still considering a range of options that may include a new tax on gas producers, a price cap and direct assistance to industry.

“The reality is anything you propose to gas producers they will find fault with,” Mr Husic told The Australian.

“What they want to do is continue to charge those prices and make that profit in a way that has negative distortions of consequences for other parts of the economy.

“I’m happy for them to make a rate of return but that rate of return that they’re pursuing at the moment – and that they’re absolutely demanding they continue to do – is just not sustainable.”

A Treasury spokesman said ACCC advice received last week would be considered by cabinet “alongside broader analysis of policy options” to address energy cost pressures.

Gas users have been starting to purchase their contracts for the next 12 months on the expectation prices would surge next year, piling pressure on the Albanese government to execute its intervention method before Christmas.

Federal Industry Minister Ed Husic. Picture: Britta Campion

The Australian Production and Petroleum Exploration Association has said domestic ­prices for the third quarter sit between $8.50 a gigajoule and $13.10GJ, well below international prices, but users say that incorporates cheaper historical rates and does not reflect prices being offered for 2023 of $30-35GJ.

The ACCC said average ­producer and retailer offers made between March and ­August in the east coast market for 2023 supply were about $20GJ.

Big energy users said the ACCC data underlined the ­pressures faced by gas-reliant manufacturers.

Andrew Richards, chief executive of the Energy Users Association of Australia, said: “While the numbers we are ­seeing at the moment are at the extreme end of the spectrum, high domestic gas prices driven by elevated ­global prices have impacted us before and will ­impact us again and again unless we moderate this power through sensible ­regulations that allow the gas industry to make a good margin while providing this ­essential service to domestic consumers at a fair and reasonable price.”

Fertiliser and mining explosives business Incitec Pivot has been a long-term critic of gas and energy pricing in Australia, and has blamed high prices for its decision to mothball its ageing ­Gibson Island fertiliser plant in Queensland.

Speaking after Incitec ­delivered a record $1bn profit on Tuesday, chief executive Jeanne Johns said that although energy prices were spiking across the world, Australian manufacturers needed certainty that gas would be available in Australia at competitive prices.

While Ms Johns would not be drawn on what she hoped the federal government would ­deliver on gas prices, she pointed to Incitec’s recent joint venture agreement with Saudi Arabia’s Modern Chemicals Company over the development of an ­explosives plant in the country as an outcome of high gas prices.

“We will make our investment decisions based on what’s best for our shareholders,” Ms Johns told The Australian.

Mr Husic said all options remained on the table.

“We haven’t necessarily ruled things in or out,” Mr Husic said on the sidelines of the UBS ­Australasia Conference in ­Sydney. “Manufacturing in particular has been saying we can’t afford these prices. We’re trying to get a sharp focus on where we need to go for the sake of business. And I do think we can make some headway.”