The Albanese government will soon release its long awaited plan to deliver more affordable and secure gas for households and businesses on the east coast of Australia.
There will be disagreements about how to “fix” the gas market, but there is broad consensus across the political spectrum that homes and businesses are paying too much for the fuel.
But how much more are we paying for gas? And why have prices climbed so steeply?
How have Australian gas bills changed?
There are numerous ways to track the price of gas – from the wholesale price, to average retail price for homes and businesses, to multi-year contracted prices for the big industrial users.
For simplicity, and to measure actual costs rather than just prices, we can look at the Australian Bureau of Statistics price indices for consumers and firms.
Starting with households, the chart below shows that, nationwide, average gas bills have jumped by 130% over the past 15 years – and by nearly 50% in the past five years alone.
But as the chart also shows, the experience is far from universal.
Melburnians have experienced the most rapid increases in gas bills, with costs almost doubling in a decade and 60% in the past five years.
Households in Sydney, Adelaide, and Canberra have also borne the brunt of rapidly rising gas costs, while users in Perth, Darwin and Brisbane have largely escaped outsized increases.
What about businesses?
When looking at the costs to companies, we have chosen the ABS producer price index figures showing gas input costs for manufacturers – the segment most exposed to jumping energy bills.
Since early 2010, manufacturers’ gas costs have jumped by 120% – equivalent to the rise for households.
It’s worth noting that these increases are well above the rise in inflation: consumer prices more broadly have climbed by 50% over the past 15 years, as the chart below shows.
Gas bills have outstripped electricity costs over the past five years, but this is likely in large part thanks to government energy bill rebates.
Looking back over the 2010s and 2020s, gas costs have generally tracked higher, but not always, and have exploded since 2022.
Analysis from the Institute for Energy Economics and Financial Analysis (Ieefa) suggests higher gas bills have cost Australian households and businesses an extra $4.3bn in 2023-24, while also contributing to more expensive electricity.
So why have gas prices increased by so much?
We are running out of cheap gas
Josh Runciman is the lead analyst for Australian gas at Ieefa.
Runciman says three factors have contributed to the rapid rise in gas prices over the past 15 years, particularly on the east coast.
First, the cheap gas from the Bass Strait project off the south-east coast of Victoria is “going, going, gone”.
This reflects the broader reality of non-renewable resources: as producers exhaust the lowest cost gas fields, they face more expensive development options.
Alison Reeve, who leads the Grattan Institute’s energy and climate program, says we “have worked our way through a lot of the cheap and easy to extract gas resources”.
“The gas sources are now further away from demand centres, and potentially harder to extract or do not contain as much burnable gas,” Reeves says.
That has an important implication, which is that “even if we stopped LNG exports tomorrow, we’re not going back to $3/GJ gas, because that gas has been burned”.
Our gas, but not our prices
The second and most politically explosive factor that has contributed to soaring gas prices over the past decade is the birth of an east coast liquefied natural gas (LNG) industry based around three major facilities on Curtis Island off Gladstone, Queensland.
The first LNG was shipped in late 2014, and since then Australia has become a global export powerhouse. It has also linked domestic gas prices with the higher priced international market.
Two years after Queensland gas started being sold to overseas buyers, the wholesale east coast gas prices tripled to $10 a gigajoule, and remains above that level today.
Amid warnings of gas shortages at home, over the past five years we have exported enough gas to supply domestic needs for more than 20 years, according to the Australia Institute.
This connection to overseas markets also exposed us to a massive rise in gas and electricity prices when global energy markets were thrown into turmoil following Russia’s full-scale invasion of Ukraine.
An uncompetitive industry
Finally, Runciman says a lack of competition among gas producers also puts upward pressure on prices.
The three big Queensland LNG exporters own 90% of the economically recoverable gas reserves on the east coast.
All of these factors “combine to create a sense of gas scarcity, and therefore scarcity pricing”, Runciman says.
This “sense of scarcity” is plainly and jarringly at odds with the geological reality that our country has huge reserves of gas.
Will gas prices come down?
The outlook for gas prices is not good.
EnergyQuest, an advisory and analytics firm, predicts that both demand for gas and its supply will fall in coming decades.
But supply will fall faster. From 2028, EnergyQuest forecasts a supply shortfall for domestic use in the southern states from 2028 – and peaking in 2034 – as production from NSW, Victorian and South Australian gas fields declines.
Runciman and Reeve agree that while a focus on supply makes sense, policymakers should be focusing on helping more families and firms get off gas.
“We have a lot of gas users who would be economically better off if they used electricity. If you look at the manufacturing sector, there are not that many businesses that are truly gas dependent,” Reeve says.
“Some use it for feed stock and some use it for very high temperature heat, but even food processors and so forth could convert to electricity.”
Runciman says less household demand would also ease pressure on those businesses struggling with a market short of gas.
“Get households off gas to save our manufacturing sector.”
