Application of Demand and Supply in the Australian Market Essay 2022

Running head: APPLICATION OF DEMAND AND SUPPLY IN THE AUSTRALIAN MARKET
Application of Demand and Supply in the Australian Market
Name of the Student
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Author’s note

APPLICATION OF DEMAND AND SUPPLY IN THE AUSTRALIAN MARKET1
Introduction
The primary objective of this essay is to highlight two significant issues which are
prevalent in the Australian market. These issues are economic in nature and are relatable to
concepts of supply and demand. The first issue to be addressed in the essay would be rising
prices of the Australian gas over the last ten years. It has been reported that the rise of the gas
prices are primarily due to linkage of the Australian market with the international LNG
market. The next issue to be addressed in the essay would be rising energy costs for the heavy
industries in Australia. Several market factors and energy policy framework have reportedly
contributed to this price escalation. In relation to these two issues appropriate theories have
been stated for analysing the situations and suitable findings are noted down as required. The
appropriate relation of costs with the demand and supply have been applied in order to
address the issues. This linkage is primarily drawn from the demand and supply theory where
price is a very important element.
Discussion
Explanation of what has been happening to the price of gas in Australia over the last ten
years
In recent years it has been reported that the electricity and gas prices have increased
sharply in recent years and the reports state that these prices will continue to increase in the
similar way in future days. The authorities responsible for the regulation of these gas prices in
Australia are Australian government with the help of state and territory government
(Moryadee, Gabriel & Avetisyan, 2014). Though the Australian government has a minor role
to play in this part, the key role is played by state and territory governments (Abbott &
Cohen, 2014).Taking into account the prices of gas in households, there has been increase of

APPLICATION OF DEMAND AND SUPPLY IN THE AUSTRALIAN MARKET2
prices approximately up to 54% in the ten years trend. For manufacturing businesses the
prises have reportedly increases to a lesser extent giving a figure of 29%.
The different factors which contribute to the rise in prices of gas in the Australian
market would be wholesale costs that are incurred for the extraction of gas, the charges that
are taken for the network provided. For gas this network can include the gas pipelines
(Cludius, Forrest & MacGill, 2014). The third factor that is responsible for the rise in the
prices of gas is the retail margin that is required for other gas services.
The prices for households as well as businesses are expected to increase remarkably
in the Eastern region of Australia. The reason for this increase could be development of new
gas export terminals which has tightened the supply of gas (Quentin Grafton, Shi &
Cronshaw, 2018). The supply of gas is on a declining level due to increase in export. If the
gas resources could be easily developed, this problem could be mitigated up to a certain level.
Proposals which have been taken by the government in checking this price rise could be
privatisation of state government owned electricity network, environmental policy adjustment
which has impact on wholesale energy cost, deregulation of the retail prices, settlement of
standards in network reliability through the usage of customer demand (Sue, MacGill &
Hussey, 2014).

APPLICATION OF DEMAND AND SUPPLY IN THE AUSTRALIAN MARKET3
Source: Created by Author
The above graph shows the effects of demand and supply of an importing country.
The brown coloured line shows the supply and it is intersecting with the dark blue coloured
line showing the demand.
Source: Created by Author