Imagine for a moment that your energy bill increased by a factor of nearly eight – from, say, $100 to not much less than $800 – in just a handful of years. Chances are you couldn't pay it.
In simple terms, that's the challenge facing some businesses, particularly in manufacturing, because of a gas market that has been allowed to run out of control.
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Turnbull's gas gamble
With surging domestic gas prices hitting consumers and businesses, Prime Minister Malcolm Turnbull says current prices are "not acceptable".
For months, the government has been told companies will be be forced to sack workers, and potentially shut, because they can't afford to pay for the fuel they need, not just for heating, but also for manufacturing processes where there is no substitute.
This is the context – as much as occasionally overhyped concerns about Australia running out of gas – that has led to Malcolm Turnbull making an extraordinary intervention to force the gas industry to provide more for local users.
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Australia, of course, has plenty of gas. During the minerals boom, the Gillard Labor government allowed the creation of an export gas industry on the east coast that saw three producers sign massive contracts with Japan. It led to two-thirds of the gas produced being sold offshore.
With those gas-hungry contracts locked in, the local price rocketed from the long-term norm of $3 to $4 a gigajoule into double figures. According to the Energy Users Association of Australia, one Queensland company is now paying $23.
Few businesses could sustain that sort of rise. It has also hit consumers, particularly in Victoria, where households use more gas than the rest of the east coast combined.
Beyond criticising states that limited gas exploration, the Coalition had been as idle as Labor was in power until the Australian Energy Market Operator warned some states could face electricity shortages unless something was done.
The Prime Minister's initial response – publicly leaning on the industry to do something – did not yield the desired response, prompting a formal requirement that each company put more gas back in the market than they take out.
It is a belated acknowledgement that, left alone, a market will not act in the national interest. Sometimes it requires government intervention. In this case, even usually free-market business groups have been demanding it.
Will it work? It should help. It is likely to trigger what are known as "gas swaps" – effectively, the companies buying extra gas offshore to replace what they export.
Whether that will deliver "affordable gas for all Australians", as the Prime Minister has promised, is another question. Analysts suggest a swap policy could lead to prices falling back to $8 a gigajoule. Let's see.
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