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Out of gas? East coast prices skyrocket threatening jobs and consumers
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By Dr Joe Milton, the Australian Science Media Centre
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An international shortage of fossil fuels caused by the war in Ukraine has led to huge increases in gas prices for businesses and consumers around the world.
Australia's east coast has been hit particularly hard, with costs tripling or even quadrupling in a single month, prompting the Australian Energy Market Operator to trigger the Gas Supply Guarantee Mechanism, which calls for the market to release supply and come up with a plan to address a potential shortfall.
Professor Ariel Liebman from the Monash Energy Institute told the AusSMC that gas prices are "hyper-sensitive to external changes in supply like the Russia-Ukraine conflict.".
And Curtin University's Dr Roberto Aguilera explained that "gas markets around the world are interconnected, so when supply declines in one region, prices tend to rise everywhere."
So, why have prices risen faster and further in eastern Australia than in other parts of the world, or even the country?
"[The Ukraine conflict] together with a cold snap and significant unexpected electricity outages have combined into a perfect storm, pushing many small innovative electricity retailers to the wall or even bankruptcy, increasing the cost of generating electricity and resulting in stark rises in gas and energy prices," said Prof Liebman.
Dr Aguilera told the Centre that these coal production outages would normally be covered by using locally-produced gas, "but it’s in short supply as much of it is contracted for export to Asia".
Prof Liebman said this failure to reserve Aussie gas for local markets was contributing to the problem: "We have huge amounts of coal seam gas which was allowed to be exported with none reserved for Australia, which has ultimately led to a situation where Australians are paying for gas prices at global parity."
So, are the war in Ukraine, the cold weather and the unexpected outages the only reasons Aussie gas prices have skyrocketed recently?
Professor Samantha Hepburn from Deakin Law School told the Centre the crisis is not only due to recent global and local pressures, but has been "percolating over many years".
"Since 2015, when the three large LNG producers commenced in Gladstone, gas prices have tripled," she said. "This is unsurprising given that 85% of this gas is exported overseas."
In terms of solutions, Dr Aguilera said short-term fixes are scarce: "Despite the rapid growth of renewables, they are not ready today to capture the market share of gas and coal," he said.
And Prof Hepburn was sceptical about the Domestic Gas Pricing Mechanism, which she said is the only legislative measure that exists to deal with this. "[It] has never been triggered and appears to be little more than a rhetorical flourish," she said. "This is completely unsatisfactory."
Associate Professor Behzad Fatahi from UTS suggested Australia should prepare for the future by building more versatile large energy storage facilities: "For example," he said, "building versatile large LNG storage facilities can help to meet the current demand and may also be used in future for storage of other types of energy such as hydrogen or ammonia as a hydrogen carrier."
Prof Liebman offered one immediate solution: "Pull the so-called ‘gas trigger’ to requisition supplies of gas intended for export," he suggested, adding that the government should seriously consider a "full gas reservation policy for the entire country, similar to the one in Western Australia and the United States”.
So, could anything have been done to prevent this crisis? Prof Liebman told the Centre he believes it could have been avoided:
"This would all have been preventable if successive governments had paid proper attention to rigorous monitoring and regulation of all the key energy markets in Australia," he said. "This is a policy failure a long time in the making and it will be very hard to remedy it quickly."
You can read the Expert Reaction in full here
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This article originally appeared in Science Deadline, a weekly newsletter from the AusSMC. You are free to republish this story, in full, with appropriate credit.
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"The answer blew us away - there was just one! That's it, just one plant has expanded over 180km in Shark Bay, making it the largest known plant on Earth."
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Jane Edgeloe from the University of Western Australia discusses her team's discovery of the world's largest plant - a seagrass roughly three times the size of Manhattan - off the coast of WA.
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This week, we joined 5AU/5CS to chat about stereotypically boring people, and tonight we'll join Andy Park on ABC Radio National Drive to chat about SIDs research, the world's biggest plant, and giraffes' headbutt battles.
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