The US and Israeli attacks on Iran risk a repeat of the 2022 energy shock that forced energy bills to rise by more than 40%, sent Australian businesses to the wall and forced governments to spend billions on energy bill subsidies.
The stark warning from experts comes after news that Qatar, the third-largest exporter of liquefied natural gas, had halted production after Iranian drones attacked its sprawling Ras Laffan complex on Monday.
The decision sent global wholesale gas prices soaring by 50% in Europe and approaching 40% in Asia, reminiscent of the global energy chaos unleashed by Russia’s invasion of Ukraine four years ago.
US and Israeli missile attacks have already blocked shipping through the Strait of Hormuz, through which about a fifth of the world’s maritime oil and gas passes.
Kevin Morrison, gas and LNG analyst at the Institute for Energy, Economic and Financial Analysis, said “gas (in global markets) has had a much more dramatic rise than the price of oil.”
“What the market is saying is that they fear the impact will be much greater for gas than for oil,” Morrison said.
Australian wholesale gas prices have tripled over the past decade, coinciding with the start of major LNG export terminals in Queensland, which linked domestic prices to the more expensive and volatile international market.
Following the Russian invasion of Ukraine, domestic gas and electricity prices for households rose by 27% and 43% respectively in the year to March 2023, while gas prices for manufacturers rose by 46%.
So far, there is no evidence that the Middle East conflict has begun to affect the price of Australian LNG and domestic gas prices. Morrison, however, said there were similarities between what was happening now and what was happening four years ago.
“We have a large global gas supplier that is being phased out, so the threat is there. We were heading into a period where gas prices were supposed to go down, but now the hallmarks are there for a prolonged price increase,” he said.
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The government has announced a national gas reserve scheme that will force LNG exporters to reserve up to a quarter of their gas for domestic use, but that will not begin until early next year.
For now, however, “we are very, very exposed to international prices,” Morrison said.
“We could start to see an increase in gas prices nationally, and that carries over to electricity; there is a strong correlation between them. If we combine that with the increase in gasoline and diesel prices, we will have an overall increase in energy prices.”
A spokesperson for Resources Minister Madeleine King said measures taken by the Albanian government, such as the reasonable pricing mechanism of $12 per GJ under the gas market code, “have insulated the domestic market from extreme price spikes, such as those that occurred as a result of Russia’s illegal invasion of Ukraine.”
The spokesperson noted that the national gas market was expected to be “well supplied” in 2026, but that “the government continues to monitor the situation.”
“The recently completed gas market review will allow the Albanian government to secure more affordable gas for Australians, better protect businesses from international price increases and ensure the industry is on a stronger footing when it comes to negotiating gas contracts by introducing a national gas reserve scheme.”
But Tony Wood, senior fellow at the Grattan Institute’s energy and climate change programme, said measures taken by the government in recent years had not completely broken the link between global and domestic gas prices.
“What is happening now will put a lot of pressure on the government to be much stricter, not only to ensure that the domestic market is supplied, but also to ensure that the price does not reflect crazy international prices,” Wood said.
“When Ukraine happened, many thought it would be a short and hard war, but here we are four and a half years later.
“Just when everyone was starting to think we might see LNG prices go down, we might not.”
