Soaring Energy Prices in Australia: An Economic Analysis

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
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1ECONOMICS ASSIGNMENT
Table of Contents
Introduction......................................................................................................................................2
Analysis of the article......................................................................................................................3
Rising price of energy..................................................................................................................3
Economic theories to explain high price of energy.....................................................................3
Supply shortage and soaring energy prices in Australia..............................................................7
Conclusion.......................................................................................................................................8
Reference list.................................................................................................................................10

2ECONOMICS ASSIGNMENT
Introduction
Soaring energy prices in Australia today has become a major cause of concern.
Australians now pay one of the highest electricity bill for residential usage in world. Shortage of
energy is the main factor contributing to growth in prices. Energy shortage in Australia is quite
surprising as the nation is known for its abandoned stock of resources. The transition from coal
based energy supply to a renewable one is often held responsible for high electricity bills of
Australians (Power-technology.com. 2018). Since several decades, Australia is considered as a
lucky country because of the favorable circumstances that contribute to economic prosperity.
Australia possesses one of the biggest stock of coal and natural gas of the world. The nation thus
is blessed with unrestricted availability of energy resources.
In view of growing concern to global warming and pollution, focus of the world has now
shifted to make the energy system decarbonized. In addition to abundant supply of traditional
energy source, the nation also has the potential to utilize renewable energy sources. Australia has
an estimated amount of 5000 exajoules wind and solar energy resources (Finder.com.au 2018).
This is almost 60 percent larger compared to combined supply of coal, oil, gas and uranium
resources. Extensive export of energy is another factor that caused supply shortage in the
domestic market.
The recent event of soaring energy price in Australia is explained using basic
microeconomic concepts of supply, demand and market equilibrium. A recently published article
has expressed great concern towards the issue of sky reaching energy prices in Australia. Several
factors are discussed to explain the price trend of energy. These include transition towards
renewable energy sources, adaptation of climate policy and tendency of energy supplier to export

3ECONOMICS ASSIGNMENT
over the need in the domestic market. All the relevant aspects are analyzed with the framework
of standard demand and supply model.
Analysis of the article
Rising price of energy
Australia though is considered as one of the energy abundant nation, use of energy for
residential and commercial usage has now become extremely expensive. People living in eastern
states like South Australia, New South Wales, Queensland, Victoria, Queensland and Tasmania
constitute the largest electricity market of Australia are the payers of highest bill of residential
energy usage globally (Hutchens 2018).
At the top list in South Australia, electricity costs AUS 0.50 per kWh. Queensland, New
South Wales and Victoria are among the list of world’s top ten highest paying nation of
electricity prices. For European Union, the average price of electricity is around AUD $0.30 per
kWh. Consumers in US pay a relatively low electricity price with price lying between AUD
$0.10 and AUD 0.20 (Power-technology.com. 2018). As per the published report in June, the
national energy market in Australia experienced a hike of 130 percent in the wholesale prices of
electricity.
The high-energy price not only hurts common people in Australia but also hurt the
businesses those are highly energy dependent. Alchin Long Group, an equipment manufacturer
of Sydney is considering bringing back Chinese operation to Australia following a huge rise in
electricity price (aph.gov.au. 2018). Mining and other companies also express their concern
regarding new investment in Australia because of surging cost of one of the primary input.
Economic theories to explain high price of energy