Can anything be done about the ‘perfect storm’ in Australia’s energy markets?
The treasurer, Jim Chalmers, has described Australia’s energy markets as a “perfect storm” that is threatening to hit consumers, business and the wider economy hard.
“We’ve got spiking gas prices, spiking electricity prices, and spiking prices for petrol,” he said on Thursday. “There’s no use beating around the bush: these challenges in the energy market are part of this cost of living crisis that we’ve inherited.”
So how bad is this crisis, and what can the Albanese government or others do about it?
Russia’s invasion of Ukraine in February, and the resulting sanctions, sent global energy prices soaring. Commodity prices were already on the climb as economies juiced up by spendthrift governments rebounded rapidly. Oil prices jumped significantly in the two months before the war.
The Reserve Bank of Australia governor, Philip Lowe, repeatedly cited Australia’s smaller energy price rises, because of our energy abundance, as a reason inflation was less of a threat than in the US or Europe, and hence why there was less need to hike interest rates.
But that exceptionalism is fading fast. Motorists were the first to feel the pain, as fuel prices follow global trends with only short lags. Gas is similarly tied to international markets, and when its price doubled or more, the effects inevitably showed up in our energy markets. And, of course, the RBA has joined its overseas peers – albeit a tad late – in resuming interest rate hikes after a decade of cuts.
During the first quarter of 2022, wind, rooftop solar and large-scale solar output met a record 27.3% of the grid serving eastern Australia, up by almost one-fifth on a year earlier. Add in hydro, and clean energy made up 33.7%, also a record, the Australian Energy Market Operator
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