Gas prices jump on offshore push

Victorian households and businesses are faced with sharply higher gas prices over the next few years as the slew of gas export projects in Queensland pushes domestic gas prices to international levels.

Victorian households and businesses are faced with sharply higher gas prices over the next few years as the slew of gas export projects in Queensland pushes domestic gas prices to international levels.

A forecast by the Grattan Institute, released on Monday, has found that the average household gas bill in Victoria will rise by about $150 to an estimated $900 a year by 2020.

The impact will be more muted in other states such as NSW and Queensland, since they use much less gas than Victorians.

"Its relatively cold winters also increase household demand for gas for heating," the study said.

To assist in the transition, a range of measures is needed to improve transparency of the gas market, including establishing new trading hubs and launching a gas price index, along with other measures such as freeing up the trading of pipeline capacity, the study found.

As much as $50 billion is being invested to develop a number of gas export projects in Queensland that will change the shape of the domestic gas industry.

The impact will be marked on Victorian households in particular, while also hitting manufacturers who rely on gas as their primary source of energy.

"Wholesale gas price increases of more than 80 per cent nationally can be expected," the report found, as domestic prices of about $3 to $4 a gigajoule move closer to international levels for the first time.

Japanese importers pay about $15 a gigajoule, including transportation and associated costs.

Only about 10 per cent of gas is used by households, with industry using the vast bulk.

In its study, the institute warned against setting aside gas reserves for local manufacturers at cheaper prices, notwithstanding lobbying by some of the industry groups.

"The government should resist pressure from particular user groups urging it to intervene in the market," the study argued. "Australia has far more to gain than to lose from the global gas revolution."

There is little evidence of shortages emerging, the study found, although if the government changes the "ground rules" by introducing a domestic gas reservation policy, this "could damage Australia's chances of securing future investment", the study warned.

"Overwhelmingly, Australian and international experiences of trying to protect domestic industries by restricting trade have damaged the broader economy," the study said.

Some companies, such as Incitec Pivot, have flagged higher investment on new plants abroad while some industry lobby groups have warned that higher gas prices may force shutdowns.

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