Gas prices falling, market liquidity improving

Australian gas market liquidity has improved over the past two years, helping to drive efficiency and lower gas prices for consumers according to a new report by the Australian Energy Market Commission (AEMC).

The AEMC 2020 biennial review of gas market liquidity, released today, assesses liquidity in wholesale gas and pipeline capacity trading markets. The report analyses the efficiency of those markets and how well they can cope with trading large volumes of gas, often at short notice.

Minister for Energy and Emissions Reduction Angus Taylor said the AEMC report was good news for Australian gas customers and industry, which benefit from increased market liquidity and lower prices.

“This report has shown that the Australian gas market is heading in a positive direction. A more efficient market will allow customers to access gas supplies at lower prices,” Mr Taylor said.

“That’s why we are continuing to build on the improvements highlighted by the AEMC through working with industry on reforms that with strengthen both gas supply and lower prices for consumers.”

The report’s findings highlight the important and positive impact of government reforms in helping to improve liquidity and drive down costs. The AEMC notes that the introduction of day-ahead auctions in 2019 has had a substantial effect on improving liquidity through increasing the utilisation of pipeline capacity.

“As Australia recovers from COVID-19, low gas prices will provide us with many growth opportunities,” Mr Taylor said.

“This could range from manufacturers being able to access cheaper gas to create more local jobs and Aussie-made goods, through to encouraging more gas generation to provide the firming needed to support our significant growth in renewable energy generation and investment.”

The AEMC report noted that east coast wholesale spot prices continued to fall during COVID-19, with prices in May 2020 averaging around $4-5/GJ, compared with around $10/GJ at the beginning of 2019, which is good for Australian industry.

The Government will continue to monitor the effects of COVID-19 on gas markets, and continue to deliver reforms required to ensure gas markets are well-regulated and transparent.

The Government is continually working to improve gas market competition and transparency. This includes the Commonwealth and State and Territory Energy Ministers committing to mandate the public disclosure of prices for short term contracts and production costs, putting more power back in the gas buyer’s hands. Energy Ministers are also conducting a review of gas pipeline regulation to ensure it is operating as a fair market for all.

The 2020 Gas Market Liquidity Biennial Review is available on the AEMC website https://www.aemc.gov.au/.

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