Spot and contract markets and prices

 The east coast gas market can broadly be split into the short-term spot market and longer-term contract market. 

Around 90% of gas in the east coast market is sold under longer-term contracts. ACCC data indicates that contract price offers have fallen by around 45% in the most recent six-month reporting period.

On the east coast, spot markets generally refer to the two gas supply hubs – one in Victoria and the other at Wallumbilla, Queensland – and three smaller short term trading markets at Brisbane, Sydney and Adelaide. Gas spot market prices are correlated with electricity prices as gas tends to provide the marginal source of supply during periods of high demand for electricity. This means that high demand for and/or low supply of electricity drives up the spot gas price. 

The wholesale gas price is a fraction of the retail price of gas. The retail price consists of the wholesale price plus pipeline tariffs, network, storage, and other costs, and a retailer margin. 

Pipeline transportation costs generally increase with distance. This means that gas users in southern states that purchase gas from Queensland will incur increased transportation costs relative to Queensland gas users purchasing the same gas. 

Read the full EnergyQuest fact sheet at the link below.