Australain Gas Prices on the Decline, But Long-Term Supply Concerns Remain, Says ACCC

January 10, 2025 — Australian gas prices have seen a welcome decline since the 2022 energy crisis, offering some relief to consumers. However, a new report from the Australian Competition and Consumer Commission (ACCC) warns that this positive trend may be short-lived, with significant concerns remaining about long-term gas supply on the east coast.

The ACCC’s latest gas inquiry report reveals that while a surplus is projected for 2025 and 2026, structural decline in domestic gas production is expected from 2027 onwards. This potential shortfall raises concerns about energy security and market stability, particularly for southern states already reliant on gas transported from Queensland.

Declining Prices: A Current Trend

One of the most significant findings of the report is the downward trend in gas prices. Since the peak of the energy crisis in 2022, prices offered by both producers and retailers have steadily decreased. This decline is attributed to a combination of factors, including lower international gas prices and increased domestic availability.

Between January and June 2024, producer prices for 2025 supply fell by 2%, settling at $14.77 per gigajoule. Retailer prices experienced a more substantial drop of 13% over the same period, reaching $15.43 per gigajoule. This narrowing gap between producer and retailer prices suggests improving market conditions.

“The increased availability of gas in 2025, together with lower international prices, appears to have contributed to a softening of domestic prices and a narrowing of the gap between producer and retailer prices,” said ACCC Commissioner Anna Brakey.

Short-Term Surplus Masks Long-Term Challenges

The projected surplus for 2025 and 2026, estimated at 77 to 112 petajoules and 54 to 99 petajoules respectively, offers a temporary reprieve. This surplus is largely due to shifts in contracted export volumes from peak to off-peak demand periods and increased production in Queensland, facilitated by gas swap arrangements.

However, this short-term improvement should not overshadow the underlying structural issues. The ACCC emphasizes that new gas production and supporting infrastructure are not being developed quickly enough to meet future demand.

“Our current projections indicate the potential for structural gas shortfalls on the east coast from 2027 unless supply increases or demand decreases,” Commissioner Brakey warned.

Barriers to New Supply and Retailer Practices

Several significant barriers hinder the development of new domestic gas supply, including lengthy regulatory approval processes, substantial upfront capital costs, policy uncertainty, and a lack of competition in upstream gas markets.

The report also examined retailer behavior, focusing on gas supply to commercial and industrial users. While no systemic pricing problems were found, the ACCC identified concerning selling practices, such as short offer validity periods and insufficient information on charges. To address these issues, the ACCC will publish best practice guidance for retailers next year and monitor their implementation.

Recommendations for a Secure Gas Future

To ensure long-term energy security and market stability, the ACCC recommends that the role of gas be explicitly integrated into government energy transition planning. This could involve developing a gas market system plan, similar to the existing Integrated System Plan for electricity, to coordinate necessary gas investments.

The ACCC’s inquiry into the Australian gas market, initiated in 2017 and continuing until 2030, aims to provide regular information on gas supply and pricing. The next report, focusing on the supply-demand outlook, is scheduled for publication in March 2025. While the current decline in gas prices is a positive development, the ACCC’s report underscores the need for proactive measures to address long-term supply challenges and ensure a secure and stable gas market for the future.

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