Rising gas prices are the result of a “perfect storm” of factors, according to new treasurer Jim Chalmers.
Wholesale gas prices rose last week, with fears that the East Coast power grid would not have enough supply to keep homes and businesses fed.
And the jump is likely to be reflected in the upcoming electricity bills sent to Australians.
The east coast of Australia does not have enough gas to meet supply right now. (new)
So what’s the reason for the jump in gas prices?
The most important factor behind the rise in gas prices is the war in Ukraine.
The world’s largest exporter of gas is Russia, which has been hit hard by massive sanctions.
The war in Ukraine has prevented many countries from buying gas from the world’s largest exporter, Russia. (AP)
They do not want to buy in Russia, many countries are looking for another place and pay more for it.
Inflation and bottlenecks in the supply chain also contribute to high global prices.
After a mild fall, winter has come all over Australia in revenge.
And as a result, Australians are using a lot more electricity.
This comes from heaters, electric blankets and especially air conditioning.
The start of a cold winter has made the use of energy on the roof. (iStock / Getty)
And on colder mornings, people are more likely to spend a little more time in a good hot shower.
More demand for electricity means more gas needs to be burned at power plants.
Gas shortages are exacerbated by coal shortages.
Coal prices have risen in recent months, thanks to the war in Ukraine.
And obsolete coal-fired power plants have been struggling to maintain a steady stream of electricity production.
Coal shortages mean that gas-fired power plants have to make up for the deficit. (60 minutes)
And the country’s largest coal plant, Eraring in NSW’s Hunter Valley, has struggled to get enough coal to burn.
When coal plants fall, gas plants account for much of the deficit, which means more gas is burned.
Australia extracts enough natural gas to meet its needs very easily.
But as part of a global market, much of Australia’s gas is exported.
Gas supply can be guaranteed if the government invokes the Australian National Gas Safety Mechanism.
But Energy Minister Chris Bowen has rejected the suggestion that the mechanism would be an immediate solution to the country’s gas shortage.
“It cannot take effect until January 1 next year, even if it is withdrawn today,” he said.
“It’s not a short-term response.”
Australia opens the first day of winter with heavy snowfall
What does this mean for energy prices?
Gas shortages should mean energy prices will rise, but not as much as they could, Bowen said.
“Fortunately, about 80 percent of gas contracts are made in the long run,” he said.
“In this sense, it is not yet affecting retail prices.
“It could be a lot worse.”
Chris Bowen said more renewables will lower energy prices. (Pedro de Oliveira Simões Esteves / CIWEM)
He warned that it would not improve immediately.
“More renewables put downward pressure on energy prices,” he said.
“The Matt Canavans of this world are out there saying it’s somehow the fault of renewables.
“These are electric coal cuts.”