Rumours of strikes in Australia shoots up Gas prices

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The possibility of a potential strike at an Australian liquefied natural gas (LNG) plant is causing a surge in wholesale gas prices across Europe. The Offshore Alliance union has issued a warning that a strike at the North West Shelf facility could commence as early as September 2 if an agreement on pay is not reached. This uncertainty has led to an approximate 10% increase in benchmark gas prices for the European Union (EU) and the United Kingdom (UK), according to reports from Bloomberg. While gas prices initially skyrocketed after Russia’s invasion of Ukraine, they have since declined.

Concerns are emerging that a strike at the North West Shelf facility, owned by Woodside Energy Group, could disrupt LNG shipments from Australia, a significant global supplier of natural gas. Workers at two other offshore LNG facilities, Gorgon and Wheatstone, managed by Chevron, are also undergoing voting processes to decide on potential strike actions, with the results expected to be announced on Thursday. Collectively, these three facilities contribute about 10% of the world’s total LNG supply.

Ben McWilliams, an affiliate fellow at the think tank Bruegel, has cautioned that such strikes might have a broader impact on global LNG prices. McWilliams explained that Australia typically supplies LNG to the Asian market. However, if these strikes lead to reduced Australian gas exports to Asia, Asian consumers might turn to other suppliers like Qatar, which could lead to competition among European buyers in that market. Such a situation could trigger a chain reaction affecting prices on a global scale.

The backdrop of the Ukrainian conflict and Russia’s reduction of natural gas supplies to Europe prompted many countries to explore alternative energy sources. LNG has been a key component in filling this energy gap. Australia, alongside Qatar and the US, stands as one of the world’s top exporters of LNG.

In light of the uncertainty stemming from the Australian labor disputes, Cornwall Insight has predicted that higher gas prices may contribute to a substantial increase in Ofgem’s price cap in January. The projection suggests a potential cap of £2,082.56 for a typical annual household energy bill in the first quarter of 2024. This represents an increase from the previous forecast of £1,925.71 for the fourth quarter of 2023.