Consumer advocates worried rising gas prices will hit low-income earners hard

Updated

Consumer advocates say an anticipated increase in gas prices over the next two years will push at-risk people to the wall.

Large gas projects run by companies such as Santos, Shell and Exxon Mobil will gradually come online from later this year.

The projects will triple Australia's gas production, but the vast bulk of the gas produced within those projects will be exported to Asia.

It means Australia's gas supply in the eastern states will be exposed to the international market for the first time, with some consumer and welfare advocates forecasting domestic gas bills to rise by as much as 25 per cent.

The Independent Pricing and Regulatory Tribunal (IPART) has released a draft decision on regulated gas prices in New South Wales, and says they should be allowed to increase by an average of 17.6 per cent.

IPART's draft decision would take effect from the 2014-15 financial year.

It means from July 1, 2014 typical annual gas bills will rise by between $150 and $225 for households, depending on how much gas they use.

But it appears prices are set to go up anyway, regardless of the IPART decision.

Gavin Dufty from St Vincent de Paul says it is difficult to project how much prices will rise.

"I think the hardest hit will be the people with the highest consumption, so the hardest is probably the ACT. They use a lot of gas, it gets quite cold," he said.

"Then Victoria, we use a lot of gas, a lot of people use it and it does get cold.

"And then to a lesser extent NSW and Queensland, they use less gas and there's less people that do use it."

Mr Dufty says a conservative estimate is price rises of between $140 and $300 over the next few years.

"People also need to understand, particularly in the colder states, the price shock from gas is a big thing," he said.

"Most of the bill turns up in a six-month period so it all loads up at a particular time."

He says adding the rising gas prices on top of other household bills, including electricity, water, school and health costs, will only make the impact worse.

"So an extra $200 taken out of a household budget is effectively for an age pensioner one week's wage, so when you put it in that sort of context it is meaningful and it will make a difference," he said.

"I'd expect things to crank up over the next two years and plateau off after that. I think the time you will see significant increases is 2015 and 2016."

Economist has grave concerns for manufacturing

AGL chief economist Paul Simshauser is more optimistic about the price impact on households, but has grave concerns for manufacturing.

"In a worst-case scenario you could see gas prices moving from that more recent $4 to $5-a-gigajoule range to potentially $10 or $11 a gigajoule, so a doubling at the wholesale level," he said.

"What that means for consumers depends on the consumer segment, so for mums and dads consuming gas in the home, they're getting home-delivered gas so by the time it actually gets to the household it's a lot more than $4 or $5, it's more like a $20 to $40 gigajoule price.

"So when you add $4 onto those numbers it's going to be an inconvenience but it's not going to be a profound impact on household budgets.

"Conversely for the manufacturing industries, and particularly those who use gas as a feedstock, and in many cases there's not a lot of substitutes, it's going to be a big issue if it forms a large part of their cost structure.

"Then moving from a $4 or $5 price plus $1 for transport moving up to a $9 or $10 price that can in many respects end up being fatal for manufacturers."

Consumers and welfare groups worried

Simon Coyle is on a disability pension, living with HIV, and a range of other health conditions.

He uses gas for his hot water system and to cook, and he is wondering what corners he will have to cut to cope with price rises.

Already, more than half of his fortnightly pension goes towards utilities bills.

"My electricity price has tripled in the five years since I've lived here," he said.

He says even paying an extra few dollars a week for gas will have an impact.

"Deciding whether to have a shower, deciding on what food I do buy at the supermarket, the quality of food that I buy," he said.

"Any increase in costs is just going to be a juggling game.

"Do I get the high-quality food that I need to keep myself healthy or do I go for the cheap stuff which will just add sugar, add bad fats, add stress as well?"

Lidia Gruszka is a social worker and counsellor at the Casey North Community Information and Support Service in outer Melbourne.

"I see clients who present with a lot of financial difficulties. We do simple budgets and then they are referred to financial counsellors," she said.

"But I am aware of families where their budget is in minus, so if you have not enough money and you've got all the essential commitments that you have to pay for, obviously it's going to create a lot of problems.

"People will come to places like here searching for best possible options and help that will increase the requests for emergency relief, any kind of material aid available.

"It would be a matter of priorities of their housing and their medical costs and treatments, because a lot of clients we see are unwell and require ongoing medication.

"And it will impact heavily on education and affordability to even send a child to a public school because the cost of uniforms, the cost of text books in high schools - they are costing approximately $80 to $100 per book - then there is a new requirement to provide children with iPads, we're talking about $600 to $800 per item.

"Any additional cost of any utility, you juggle between what do you do first and I think that creates a lot of problems and difficult decisions and it will impact heavily on those households."

Know more? Email: investigations@abc.net.au

Topics: oil-and-gas, industry, business-economics-and-finance, consumer-protection, australia

First posted