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Flame out: the future of natural gas 7.77 MB

Natural gas has been a valuable energy source in Australia for more than 50 years. But it faces two challenges. Firstly, Australia must reduce emissions over time to meet our climate change targets. The gas sector is no exception. Secondly, the east coast will not go back to the good old days of low-priced gas, making gas an increasingly expensive energy source.

Faced with these challenges, the federal government’s hopes for a gas-fired recovery from the COVID recession appear misplaced. Its plans include a range of sensible policies to improve today’s gas market, but it has also raised expectations of large price reductions.

The reality is that eastern Australia faces inexorably more expensive gas, and the impact will be felt by manufacturers and power generators, and by small businesses and households. If the Government tries to swim against this tide through direct market interventions, it will probably require ongoing subsidies at great cost to taxpayers.

This report confronts the uncomfortable truth that natural gas is in decline in Australia. The consequences of that reality may be painful for some in the short term, but neither wishful thinking nor denial will serve us well. The only rational approach, for governments, the energy industry, and its customers, is to begin planning for a future without natural gas, or at least with a substantially reduced role for natural gas.

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