2008 Western Australian Gas Crisis - Impact

Impact

While household gas supplies were largely unaffected, some businesses faced higher energy prices, most notably in the manufacturing and mining sectors. The supply disruption was partially mitigated by the availability of alternative fuel sources such as diesel (for power generation), additional supplies of gas from the North West Shelf plant, and the return to service of coal-fired power generation units.

Overall, the gas shortage had a large impact on Western Australian industries, particularly mining, construction, and hospitality. Some affected companies declared force majeure, and others are expected to make large insurance claims. If Apache Energy was found responsible for the pipeline explosion, compensation claims could be made against the company. State Premier Alan Carpenter said the Government will not offer compensation to businesses affected by the energy shortage, because "I don't think that the ordinary West Australian taxpayer would take too kindly to the State Government taking on a massive compensation bill for an interruption to a supply contract between commercial partners".

A survey of 301 businesses conducted by the Chamber of Commerce and Industry showed on 18 June 2008 that nearly 630 employees had already been, or could be, stood down or made redundant - nearly 1% of the workforce surveyed. Almost 50% were affected by the gas shortage, with 11 companies already completely shut down. Up to 15% of companies surveyed could potentially close after three months of energy shortages. Chief Economist John Nicolaou said "To the extent that WA represents about 20 percent of the growth in the national economy over the past year, then that means it is going to have broader implications for the national economy. So it's important people around Australia understand the issue is significant from a national perspective, not just WA's perspective."

Macquarie Group economists estimated the energy crisis could reduce gross domestic product growth by 0.25 percentage points in the third quarter, as gas prices increased and the percentage of gas production allocated to export reduced. Natural gas sales were worth $5.2 billion in the 2006/2007 financial year, and its five-year trend growth rate is 16.8%. Chief Macquarie economist Richard Gibbs said, "WA supplies the lion's share of the gas exports. The effect on exports is that as there is a shortage of gas in the system, the capability to export will be diminished because the gas that there is will be directed towards domestic use... The gas exports have been pretty healthy. In the next couple of quarters that will be moderated dramatically if not stalled altogether. I think this will have an impact on the broader commodities side and the trade gap could widen".

Modelling undertaken by the WA Department of Treasury and Finance estimated that the gas crisis would affect Western Australia's exports of chemicals, metal products, textiles, clothing, footwear and rubber and plastic products. Treasurer Eric Ripper said, "In the long term, the disruption is estimated to reduce WA's economic value by $1.8 billion between 2007-08 and 2011-12... this $1.8 billion figure (estimated at 2008–09 values), only equates to 0.2 percent of the economy over the same five-year period." The WA Chamber of Commerce and Industry (CCI) released its quarterly report on 10 July, which said, "The gas crisis has already cost the Western Australian economy in the vicinity of $2.4 billion... With gas supply expected to be restricted until December 2008, CCI estimates the overall cost to be around $6.7 billion".

The Reserve Bank reported in September that "the disruption is expected to result in a temporary reduction in national GDP growth of around 0.25%, with the impact spread across the June and September quarters".