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HI5003 - Economics for Business || Assignment

   

Added on  2020-02-24

8 Pages1297 Words35 Views
1DEMAND AND SUPPLY OF GAS IN AUSTRALIAN LOCAL MARKETStudent’s NameCourseDate

2IntroductionThe article titled “Australia curbs LNG exports amid domestic gas shortage” by Jamie Smyth on 27th April 2017 talks about the shortage of gas in Australia’s domestic market and the measures being taken to curb the situation. There are discrepancies between the supply and demand of gas in the local market. The demand for liquefied natural gas in the domestic market has grown, and yet the supply is insufficient to check on the escalating demand. The aftermath ofthis situation has been shortages and price increases for domestic consumers.The government is concerned about the deficit as the local industry will be disrupted significantly. According to the Australia’s Prime Minister, Malcolm Turnbull, it is unacceptable for Australia to be one of the largest global exporters of liquefied natural gas and yet the Australian businesses and households are experiencing a shortage. As a result, the government has introduced Gas Security Mechanism to protect the interests of local homes and businesses. Under this arrangement, the leadership will be in a position to restrict the exportation of gas in case of scarcity in the domestic market.1 This regulation has raised concerns among the producers and analysts who argue that the scheme will increase uncertainty in the industry and could further interrupt the domestic supply. Economic AnalysisDemand for Gas 1Smyth, Jamie. Australia Curbs Lng Exports Amid Domestic Gas Shortage. April 27th, 2017. Https://Www.Ft.Com/Content/6411b380-2b01-11e7-9ec8-168383da43b7 (Accessed August 24th, 2017).

3Liquefied natural gas is a valuable resource to households and business community in Australia. Therefore, as the incomes of Australians rise, the demand for gas increases considerably. The need to adopt cleaner energy has also increased the demand for this resource among the firms. Additionally, as more enterprises are being set up, the need for the liquefied natural gas has increased.2 The increase in the use of the gas in the local market has made the prices to increase. Graph 1: Increase in Demand for GasPriceQuantity The rise in the use of liquefied natural gas by Australian households and the firms is shown by the shift in demand curve from D0 to D1. This situation has increased the quantity of gas demanded and also a hike in the price. The amount of gas supplied by the producer is Qe while the quantity demanded is Q2. The gap between Q2 and Q1 depicts the shortage. The price has increased from P1 to P2.2Grafton, R. Quentin, And N. Ross Lambie. "Australia's Liquefied Natural Gas Sector: Past Developments, Current Challenges And Ways Forward." Australian Economic Review, 2014: 509-522.SP1PeD1Shortage of gasD0Q2QeQ1

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