Gas prices in Australia are the lowest they’ve been in two years. As a commodity in high demand, higher prices are being kept at bay via a Government-imposed cap which is set to expire next year. Once this is lifted next year, wholesale prices are expected to increase, and possibly double. It's not a matter of “if”, but “when” gas prices will surge. Instead of waiting for the financial blow of rising costs, it's crucial to take proactive measures now to manage your gas rates and shield your business from the uncertainty of market fluctuations.
To understand the current state of the gas market, it's essential to delve into the last few years of activity to explain the market volatility and conditions. When the war in Ukraine started in 2022, the world moved away from Russian gas (who were the largest exporter of gas). This meant Australia became a major gas exporter and we traded on the international market at $40+ Gigajoules. Due to high returns, Australia started selling all its gas overseas. Flooding and weather events at our coal mines meant lower levels of coal and electricity generation leading to further demand in gas. This led to the price of gas rising significantly from $8 to $30 per gigajoule. As a response to price volatility and to show support towards companies and households, the government introduced an emergency price cap, reducing the gas price to $12 per gigajoule. The emergency price cap offered a level of protection against steep prices and provided a little level of stability. However, the gas price cap which is set to expire in July 2025 is only a temporary relief measure and a safeguard against the inevitable.
Throughout winter 2024 the National Electricity Market has been heavily reliant on gas to produce electricity due to low amounts of wind power contributing to the market. Gas reserves are therefore slowly dissipating. These are just other factors wreaking havoc on gas pricing that we have little to no control over.
With all this in mind, gas prices will increase, and in turn, operational costs for businesses will increase. It's not about avoiding costs but securing competitive rates and staying ahead of the curve. Several companies will ignore warnings, and it will be too late. Rather than trying to decipher a dynamic market on your own, Choice Energy is here to help you and your business find competitive prices and save time.
Energy procurement is crucial, and partnering with an energy specialist like Choice Energy can help you manage your energy needs and develop a strategy to secure the best deals. Our role is to analyse the wholesale market and identify competitive rates to reduce your costs, saving you time and effort. We can look at your current gas rates to see whether or not it's beneficial to consider existing prices or forward contracting. Forward contracting allows us to buy an asset for a specified future date for a price agreed upon today. Either way, reviewing current pricing and determining the best steps to move forward is essential.
Having an energy broker in your corner to oversee your electricity or gas rates has market advantages. We can access more market-leading rates and deals with retailers than what's publicly available. This process usually takes 3 - 5 business days to secure gas rates as quickly as possible.
If you haven’t reviewed your gas rates, call us and we can assess your current rates at no extra cost.
References:
https://www.aer.gov.au/industry/registers/charts/gas-market-prices
Other references:
https://7ampodcast.com.au/episodes/the-truth-about-the-gas-crisis
