2022 has been the year of soaring energy prices, with prices up 141% in the first quarter of 2022 compared with last year. While a lot has been said about the rising cost of electricity, we shouldn’t overlook the fact that gas prices are also through the roof.
There are a lot of common reasons that are causing electricity and gas to go up. Two of the main factors have been the war in Ukraine and the COVID-19 pandemic.
The war in Ukraine
When Russia invaded Ukraine in early 2022, many countries applied sanctions on Russian exports and banned the import of their fossil fuels. With Russia being one of the leading exporters of natural gas, the sanctions left a 200 billion cubic meter hole in the global gas market. As a result, international prices went through the roof.
The ongoing disruptions to supply chains following the coronavirus pandemic have led to an increased price for almost all goods and services that need to cross international borders. This includes fossil fuels and natural gas.
When it comes to gas, there’s another huge factor pushing Australian prices up – the export crisis.
The gas export crisis
Australia is one of the largest producers of natural gas in the world. In 2021, we produced 147 billion cubic metres of it, so it seems unlikely our relatively sparsely populated country would ever run short. Well, that’s where things take a twist!
Even though we produce this huge amount of natural gas, more than enough to service the domestic market ten times over, we don’t hold on to what we need. We export it! Australia exports around 80% of our natural gas, in fact, along with the USA and Qatar, we are the biggest exporters in the world.
In what many people consider a series of energy policy failures, the Coalition government gave free rein to gas companies to export as much of their gas as they like, with no requirement to service the domestic market first.
The result is that Australian retailers have to compete in the global market for our locally produced gas. So while international prices are in turmoil due to a supply shortage, so are ours. And to rub salt in the wound, gas companies can make huge profits by selling gas internationally, while Australians are left paying inflated prices for resources taken from our land.
The eastern states of Australia export a lot of gas to Asia, which is currently experiencing a supply crunch relating to the disruptions in Russia. This means gas companies can charge a premium to their Asian markets, and are using this premium price as a benchmark for domestic prices too.
To further exacerbate the problem, the sanctions on Russia came into place almost overnight, leaving countries with no time to source sufficient alternative energy sources. In the scramble to keep their power on, countries have had no choice but to buy gas on the ‘spot market’. This means gas is bought at the current, extremely high, market value, rather than a lower price negotiated through bulk buying or long-term contracts.
Australian gas companies have used the increase in activity in the spot market to justify charging the same high prices in the domestic market.
Gas is used in the production of electricity and many forms of manufacturing, so when gas prices go up, a whole host of other goods and services go up as well.
Source: Climate Council
What can be done?
The Australian government has stepped in to help relieve the situation, however, experts and ministers on both sides of politics agree that there is no quick fix to this multifaceted problem.
In response to forecasted gas prices of up to 50 times the normal level, in May 2022 the Australian Energy Market Operator (AEMO) imposed a wholesale price cap of $40 per gigajoule. This cap aims to help stabilise the market and protect retailers and consumers from future spikes.
In June, state energy ministers agreed on an 11-point plan to overhaul the industry and undo some of the past policy failures.
The plan gives the AEMO the power to buy and store gas, effectively creating a reserve to be drawn on in times of supply shortages. Regulators will also be given a broader scope to ensure transparency in the gas sector.
In addition, the Australian Domestic Gas Mechanism, or the ‘gas trigger’ will be extended to 2030. The trigger works by limiting gas exports during periods of domestic supply issues. However, many remain sceptical of its usefulness, largely because since its introduction in 2017 it has never been used, despite the current, unprecedented crisis caused by gas exports.
In the long term, many experts feel the move to renewable energy is the only solution to avoid a similar crisis happening again.
How can I save on my gas bill?
With such high levels of volatility in the wholesale market, it’s more important than ever for consumers to stay vigilant. There are some actions you can take to try to avoid or offset the energy price spikes and bring some financial relief to your household.
Concessions and rebates
Each state government offers concessions and rebates to support households with the cost of energy. Click on one of the links below to find out if you are eligible.
- New South Wales
- South Australia
- Australian Capital Territory
Reducing your reliance on electricity and gas from the grid can protect you when prices become volatile. The best way to do this is to install a solar power system, including solar batteries, in your home. You can read more about renewable and solar energy in our guide to renewable energy options in Australia.
Reduce energy usage
Reviewing your energy usage habits and cutting down on how much you use wherever possible can lead to some big savings. Read more about how to save energy in your home.
Compare electricity and gas plans
In states with a deregulated energy market, consumers are free to compare electricity providers and choose the best cheap electricity and gas option for them. This means you can find the cheap electricity in Victoria, New South Wales, South-East Queensland, South Australia, ACT and Tasmania.
Read more and compare energy and distributor costs in your state by following the link.
Comparing gas plans for your household can be time-consuming and confusing. You need to consider your unique circumstances, including your location, size of your home, energy habits, other utilities and relevant special offers and discounts.
A CheapBills expert is waiting to help take the hassle out of switching electricity and gas. Call us on 1300 786 045 or enter your details online and let us do the hard work for you. All you need to do is sit back and enjoy the savings on your gas and electricity bills!
Check out some of our favourite electricity and gas plans in the table below.
|Plan||Cost per month||Favourite feature|
Solar Max and Flexi Plan
|$233*||High solar feed-in tariff of 10c/kWh|
|Tango Energy Pre-Pay and Save||$211*||Low gas rates for customers who pre-pay their account|
|ActewAGL VPP Plan (electricity only)||$120^||9% less than the electricity reference price, equal to half your daily supply charges free.|
|Origin Energy Flexi Rate ePlaus||$203*||Discounted electricity and gas rates for customers who sign up to email bills and letters|
|AGL Energy Value Saver||$216*||$150 sign-up credits for new customers|
|Red Energy Red EV Saver Plan (electricity only)||$106*||Free electricity use period between 12pm – 2pm on Saturday and Sunday.|
|Simply Energy Simply Basics||$227*||100% carbon neutral energy|
|Lumo Energy Basic||$217*||100% Australian owned with award winning customer service|
*based on the retailers ‘medium’ usage for Melbourne customers. Your actual bill will vary depending on your usage.
^based on the retailers ‘medium’ usage for Canberra customers. Your actual bill will vary depending on your usage.