SYDNEY - Australia is one of the world's biggest suppliers of natural gas, yet the country is facing domestic shortages and soaring prices.
The immediate trigger for the gas crisis has been rising global energy prices due to the war in Ukraine, and a burst of icy weather in Australia that has increased the demand for electricity and heating. Adding to the problem, coal-fired power electricity stations have suffered outages or struggled to secure adequate coal supplies, adding to the pressure on gas-powered stations to make up the shortfall.
As gas prices have soared, some local electricity retailers took the unusual step of advising their customers to look elsewhere for better deals because they were going to have to double their prices. These smaller suppliers suggested that customers may find cheaper deals from other firms, particularly those that generate their own energy.
The soaring gas prices are adding to concerns about the rising cost of living and is presenting the new Albanese government with its first domestic crisis since it was elected almost three weeks ago. Surging inflation - the annual inflation rate is already above 5 per cent - prompted the country's central bank to increase interest rates on Tuesday (June 7) by 0.5 per cent, which was the biggest hike in 22 years.
The Energy Minister, Mr Chris Bowen, on Wednesday convened an emergency meeting on Wednesday of energy ministers from the various states, which are involved in the transmission and distribution of energy and have a large influence over prices and supply.
Following the meeting, Mr Bowen said on Wednesday night that the ministers agreed to give powers to the Australian Energy Market Operator - which ensures supplies of gas and electricity are reliable - to obtain and store supplies in case of emergencies. Significantly, he also announced that the ministers agreed to work on a plan for transitioning to growing use of renewable energy.
"The reason why we are in this crisis today is because there hasn't been enough planning about the changes that are necessary," Mr Bowen said.
"We need more transmission, we need more renewables, we need more storage."
But the deeper cause of the current gas crisis in Australia is that firms that extract gas - much of which is in offshore basins - have been allowed to lock in large export contracts without reserving supplies for domestic use. The largest buyers of Australian gas are Japan, China and South Korea, which accounted for about 85 per cent of Australian exports in 2019.
Business commentator Ian Verrender said that state governments on the east coast - which covers the three largest cities of Sydney, Melbourne and Brisbane - had failed to secure supplies and had given "local and multinational energy firms carte blanche to export as much as they'd like".
In contrast, Western Australia requires producers to reserve 15 per cent of gas for the domestic market - a measure that has helped to keep prices low and supplies steady.
"Australia doesn't have a gas shortage," he wrote on the ABC News website. "It's just that, in the east, at least, we've allowed most of it to be sent offshore."
Some commentators have called for Australian authorities to impose a special tax on the profits being reaped by gas firms due to the surging prices - a move that could help to subsidise consumers who are struggling to pay their bills. There have also been calls to increase investment in the power grid to ensure that the fast-increasing supply of renewable energy is properly managed.
Others say producers should be required to set aside gas for the domestic supply as occurs in Western Australia.
"Naturally Australia should have cheaper prices because the industry is heavily subsidised and we've opened new areas for exploration," Mr Bruce Robertson, from the Institute for Energy Economics and Financial Analysis, told the news.com.au website.
"Yet still the gas industry returns the favour by charging Australians too much for gas. It will never end until we have introduced a domestic gas reservation policy just like Western Australia."