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  • Writer's pictureCrest Economics

Albanese proposes ‘price caps’ on energy prices – November 2022

Australia's government is considering a possible cap on the prices that gas producers can sell into the domestic market to tame surging energy costs. War-induced price shocks are being felt by households and businesses as domestic gas prices rose by sixfold since March 2021 with a 56% increase in electricity prices and 44% increase in gas prices expected over the next two years. Concerns that a rush to boost exports to reap higher profits overseas by the nation’s major LNG producers such as Shell and Chevron Corp. have left local consumers facing a fuel shortfall that will add to pressures pushing power bills higher.

Anthony Albanese won office in May with a promise to keep energy bills low but has deferred from making any direct payments to households. Treasurer Jim Chalmers had asked the ACCC to look at whether making the voluntary code of conduct around gas purchase negotiations mandatory would assure supply and lead to reasonable pricing, indicating a potential move to cap the wholesale price of coal or gas.

Despite windfall profits accruing to coal miners and gas producers, Albanese said the government has no plans to impose any tax on mining companies or take any measures to impact supply. Comparatively, the EU and UK have imposed windfall tax on oil and gas companies' profits to raise funds to support households hit by soaring energy bills.

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