Eastern Australia’s gas market is undergoing a technological change with lower operating cost energy alternatives available for customers in manufacturing, electricity and the residential gas markets. The rate of adoption of these technologies will determine the scale of the substitution of gas, and there is a risk that the decline in gas demand may accelerate.

Eastern Australia’s gas users have more options to assess in energy supply that are from lower emissions-intense sources if they want to transition away from fossil fuels. Government and energy policymakers should consider more demand-driven measures than viewing energy market challenges solely as a supply issue, particularly in the residential and electricity markets where investment in all-electric options will result in lower household energy bills.

Key findings

When excluding gas used for LNG production, gas demand in eastern Australia dropped to a 25-year low in the fiscal year (FY) 2023-24, with a 32% decline since FY2012-13. 

Gas use declined across the main consuming sectors: manufacturing, electricity and residential. This fall follows a 40-year period of continuous increase; the turnaround coincides with the start of LNG exports from Gladstone in Queensland. 

Since LNG exports began, average gas prices have tripled due to the stronger linkage between LNG export prices and domestic gas prices. Correspondingly, the largest gas use reductions came from the electricity and manufacturing sectors, which tend to be more price-sensitive. Prices are likely to remain higher than pre-2015 levels for decades.