No end to rising gas prices for manufacturers

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Rising gas prices continue to be a sore point for manufacturers, with many fearing the crisis will cause widespread job losses in the sector.

Chemistry Australia CEO, Samantha Read, said manufacturers in the Australian chemistry industry are not seeing an end to rising east coast gas prices.

“While there has been some important Government action, the crisis is not over,” Ms Read said.

“If anything, there appears to be continued upward pressure both on the cost of gas and its delivery. Members are still reporting increases of between 30 per cent and 60 per cent in negotiating new gas energy contracts.

“Continued rises of this magnitude really are a question of survival. Demand destruction is not a solution to the gas crisis.

“Australia will pay a heavy price with job losses across the manufacturing sector. This is a double-whammy hitting everyday Australians who are already struggling at home with rising power and gas bills.

“The 2014 Deloitte Access Economics Report forecast losses of 14,500 jobs between 2014 and 2021 in net present value terms, due to rising gas costs and constrained supply.

“There are real industry concerns the job losses may be higher than forecast. The modelling applied was based on gas in the $8 to $10 per gigajoule range, but anecdotally we are hearing of $12 to $16, and even higher prices.”

Ms Read said these shifts of a dollar or two per gigajoule don’t illustrate the full impact to businesses, where the actual dollar effect is in the hundreds of thousands, and in some cases millions, added to input costs.

“We welcome the Federal Government’s announcement last week that the Australian Domestic Gas Safeguard Mechanism is now active. This provides some short-term supply certainty for gas buyers,” Ms Read said.

“Short-term measures help give businesses time to assess their position. But it’s the long-term vision that will ultimately decide whether a business continues operations in Australia.

“If a business can make it through this period of crisis, will there be more gas supply, at more competitive prices, into a more transparent market?

“The most fundamental part of this picture is new gas supply. If all states were to adopt the ACCC’s recommendation for a case-by-case assessment on projects, this would open investment and jobs growth potential.

“There has been a lack of understanding of how critical domestic gas is to job creation. Australia has an abundance of gas; our ambition should be greater than just meeting current day demand.

“Gas can create opportunities right through Australia’s value chains, and be a catalyst for investment just as it is in other countries endowed with similar gas reserves.”

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