The ACCC says high gas prices are harming productivity.

The Gas Inquiry 2017‑20 Interim Report released by the competition regulator this week shows that most commercial and industrial Australian gas users will pay more than $9/GJ for gas this year, and some more than $11/GJ.

ACCC Chair Rod Sims says the fact wholesale gas prices remain so high means many Australian manufacturers are struggling to compete internationally.

“Commercial and industrial gas users have been telling us for some time that at those gas prices, their operations are not sustainable in the medium to longer term,” Mr Sims said.

“Businesses that rely heavily on gas are increasingly likely to relocate from the east coast or wind up their operations.”

Mr Sims said the evidence is out there, with the recent announcement by Dow Chemical that it would close its Melbourne manufacturing plant due, in part, to high gas prices.

Additionally, RemaPak, a Sydney-based producer of polystyrene coffee cups, and Claypave, a Queensland-based brick and paving manufacturer, have entered administration citing rising gas costs as an important contributing factor.

“Many other manufacturers are close to making critical decisions on their future operations. If wholesale gas prices do not soften, it is just a matter of time before they follow Dow, RemaPak and Claypave,” Mr Sims said.

The ACCC’s report notes that, after increasing over the course of 2018, expected LNG netback prices have fallen significantly over the past six months. The ‘netback price’ is a measure of an export parity price that a gas supplier would expect to receive for exports.

“We expect that those same suppliers have revised their prices down this year to reflect these latest expectations as quickly as they escalated them last year,” Mr Sims said.

“So far we are not seeing this.”

The report notes the Australian Energy Market Operator’s launch in March of a capacity-trading platform to allow unused pipeline capacity to be traded or acquired through auctions.

The ACCC says some market participants are making use of this new auction platform and transporting material quantities of gas from Queensland to New South Wales and Victoria.

However, Mr Sims emphasised that the level of future domestic prices in the southern states would depend on supply in the southern states.

“I urge producers to carry out the investment in gas production they planned,” Mr Sims said.

“Also, as I have done for some time now, I urge state governments to play their role in providing access to gas resources by adopting policies that consider and manage the risks of individual gas development projects, rather than implementing blanket moratoria and regulatory restrictions.”