Australia's electricity prices to hold firm amidst oil price crash

Domestic gas prices are high enough that LNG firms are eyeing to import gas.

The 30% crash in oil price on the back of the Saudi-Russia price war is not bringing down electricity prices in Australia as gas prices in the east coast are kept too high, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

The falling oil price should be placing pressure for domestic gas prices to drop. However, there are four consortiums looking at building import terminals on the east coast, which implies that the prices domestically are well above offshore prices.

“We have this absurd situation where Australia will be importing the gas it exports, which is very similar to something like importing oil to Saudi Arabia,” IEEFA’s LNG/gas analyst Bruce Robertson said, noting that Australia is the world’s second largest exporter of gas.

The institute recommended for the east coast of Australia to take its lead from Western Australia (WA), where there is a domestic gas reservation policy in place that is keeping electricity prices well below the level paid across Asia.

“Australia needs some strong action by governments at both the state and federal level, but particularly the federal level, to protect gas and electricity consumers. At the moment we are not seeing it,” Robertson said.

The report stated that gas prices set the price of electricity in Australia, with the Australian Competition and Consumer Commission (ACCC) saying that electricity prices grow as gas prices rise.