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Australia in Crisis: Skyrocketing Energy Costs and Looming Gas and Power Shortages Grip the Continent

Published: June 2, 2022
A general view of the steelworks and coal loading facility in Port Kembla on Feb. 01, 2021 in Wollongong, Australia. (Image: Brook Mitchell/Getty Images)

This week, thousands of Australians received startling notices from their energy retailers; prices are expected to surge in July by as much as 100 percent and experts say millions of other Australians should brace for similar cost hikes. 

The price hikes come as Australians are being told to expect gas and power outages over the following days as a cold snap sweeps across many parts of the continent deepening the energy crisis. 

Joel Gibson, campaign director for One Big Switch, a consumer advocacy group, told ABC News Australia, “I think panic is just starting to set in. This is now wall-to-wall on every news bulletin across the country in the past two days,” adding that, “And I think people are now receiving these letters from their retailers, so it’s becoming real.”

Gibson says the skyrocketing cost of wholesale electricity is wreaking havoc in the retail electricity market.

Since March last year, electricity prices on the continent have jumped more than 140 percent, Gibson said, adding that gasoline prices have shot up at an even more alarming rate. 

The price hikes are being attributed to a spike in the cost for coal and gas, which is used to produce the majority of electricity in the national market. 

In the face of these cost increases many retailers are at risk of going out of business. 

“I think there’s real cause for concern because we’ve never seen anything like this before,” Gibson said, adding that “We’ve never seen price hikes from multiple retailers of over 100 percent, which is what we’ve seen in the past couple of weeks.”

“We’ve never seen wholesale gas prices like they are at the moment – the regulator has actually had to put a cap on wholesale gas prices to stop them careering out of control,” he added.

Reportedly, many retailers are refusing to serve new customers amid fears they will be exposed to mounting losses should energy prices surge even further. Customers are being forced to sign up with “suppliers of last resort,” providers such as Origin and AGL.

Australians brace for gas and power outages

Millions of Australians in multiple states are being told to brace for gas and power shortages over the next few days as the east coast suffers under a cold snap that is pushing the country’s energy supplies to the limit. 

During an emergency phone conference on June 1, the Australian energy regulator said that Victoria, South Australia and Tasmania are experiencing gas shortages. Meanwhile, in NSW and Queensland power supplies are expected to be stretched, the Australian reported. 

The Australian Energy Market Operator (AEMO) told more than 100 industry members that they may be forced to cut gas use while AEMO, for the first time ever, evoked an emergency supply guarantee mechanism on gas producers.

The chief executive for the Energy Users Association of Australia (EUAA), Andrew Richards, said that “This is the biggest energy crisis in 50 years.”

Australian gas prices have skyrocketed from around $3 per gigajoule (Gj) to more than $380/GJ this week, forcing the regulator to cap gas prices at $40/Gj in Sydney, Melbourne and Brisbane for the first time ever.

The situation is being described as a “perfect storm” by Treasurer Jim Chalmers who warned that there is “not one measure that can fix this overnight,” adding that, “This is a big problem.”

Blaming the former government he said, “There is no use beating around the bush. We have got spiking gas prices, spiking electricity prices and spiking prices for petrol as well.”

The crisis is spilling over to other parts of the Australian economy. Chalmers said the crisis “extends beyond into building supplies and all the rest of it.”

“It is a consequence of a perfect storm of international and domestic factors but it is also the cost and consequences of almost a decade now of energy policy chaos,” he said.

Chalmers said his Labor party wants to get cleaner and cheaper energy into the grid however it will take time.

Australian energy producer, Origin Energy, called on the government on Wednesday to restart the sputtering coal sector as a means to bring prices down.

Origin chief executive, Frank Calabria told The Australian, “The key matter which I think industry and governments need to work through is how they actually lift the output of the coal generation capacity here.”

Calabria is warning that Australia is at risk of an energy crisis not unlike the one currently being experienced in the UK where dozens of small retailers have been forced out of the market. 

One Australian retailer told its 70,000 customers this week that they should switch retailers. 

The chief executive of ReAmped Energy said in a video message on Tuesday, “With the state of the Australian electricity market, the best thing you can do is leave ReAmped Energy and find another retailer. Prices are going to go up and they are going to keep going up and we simply don’t want to be passing those sort of costs on to our customers.”