Magazine of Socialist Action in Australia

End the gas price rip-off

Reading Time: 3 minutes

Working people have felt the pressure of surging gas prices in recent times. The average nation-wide cost of natural gas climbed 40% in real terms between 2006 and 2015, and has soared only higher since then.

Although the price rise has been blamed on a shortage of gas, the responsibility really lies with a tiny cartel of six monopolies that dominate the domestic gas market. Australia possesses vast natural gas reserves and is the world’s second largest exporter – close to 60 million metric tonnes of liquified natural gas (LNG) are expected to be delivered overseas this year. These companies extort high prices by artificially restricting the local supply while shipping LNG elsewhere for international sale. Many of them pay little or no tax.

Dire forecasts of an energy crisis made headlines in March, when the Australian Energy Market Operator (AEMO) released its annual Gas Statement of Opportunities report. This report warned of a shortfall in available gas by 2018, potentially leading to price spikes and widespread power blackouts. These warnings were seized upon by industry bosses and capitalist politicians to demand an expansion of natural gas production, including destructive fracking.

A study by University of Melbourne researchers, entitled A Short-Lived Gas Shortfall, pointed out that AEMO’s projected shortfall was only 0.20% of the annual gas supply – a figure so small that it is insignificant in the context of fluctuating energy needs. The study concludes, contrary to AEMO’s report, that a “gas-supply shortfall is very unlikely to occur”. While this may be the case, the outrageous price gouging by the gas industry nonetheless places a heavy burden on households as well as many small businesses.

Under pressure to deal with the situation, the Turnbull government responded in May by announcing new measures to limit exports when domestic demand remains unfulfilled. Turnbull boasted that by imposing export restrictions, gas companies will be forced to maintain a sufficient supply for the domestic market. He claimed this will help bring prices down. “[Wholesale prices] will be cheaper than the prices that are being offered now. People in Australia are being offered prices of $20 a gigajoule, it should be around half that,” Turnbull said.

The fact that Turnbull was compelled to rely on state intervention to secure the country’s energy future bluntly demonstrates that the so-called ‘free market’ is incapable of allocating resources to where they are needed most. The capitalist system places short-term private profit before all else, even when this causes serious problems in wider society.

It is doubtful that restricting exports will have any serious impact on prices. Prices will stay high because the six largest companies still have near-total control over the market. Turnbull’s plan to force them to provide enough gas to avoid a shortage does not entail price controls or other measures aimed at making them supply it cheaply.

Low consumer prices and energy security can only be achieved by bringing the sector into public ownership. Nationalising the industry, and planning it with democratic input from ordinary workers and consumers, would allow gas to be allocated where it is needed most. Socialists argue that this should be part of a wider democratically planned economy, that ends profiteering by the top corporations and places the needs of the community first. A socialist economy could rapidly set about developing society to meet the needs of the future, while ending unemployment and raising everyone to a comfortable standard of living.

Ultimately, reliance on gas for our energy requirements needs to be phased out. The impending threat of climate change demands a transition away from fossil fuels. Most household uses of natural gas, such as for heating and cooking, could be replaced with electricity. This however would require major investment in renewable energy sources, on a scale that the private sector has shown it is unable to provide. Bringing the oil and gas industry into public hands would open up an enormous amount of wealth that could be used for this purpose. This would lay the foundation for a sustainable economy capable of providing free energy to all who need it.

By Jeremy Trott


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