Report: Demand and Supply Dynamics of Key Resources in Australia

This report examines the demand and supply dynamics of key resources, particularly mineral resources like natural gas, in Australia. It highlights the challenges of supply shortages, primarily due to large-scale exports of Liquefied Natural Gas (LNG), which leads to price increases and potential power supply issues. The report discusses the economic theories of supply and demand, the impact of cartels, and the effects of reduced domestic supply. It analyzes the role of government regulations, alternative energy sources, and the need for prioritizing domestic demand. The analysis covers the imbalance between supply and demand, the influence of international markets, and the consequences for consumers, including high prices and potential blackouts. The report recommends regulatory interventions to control prices and increase domestic supply to ensure stable power supply and economic progress.

Running head: DEMAND AND SUPPLY OF CERTAIN RESOOURCES IN AUSTRALIA
Demand and Supply of Certain Resources in Australia
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1DEMAND AND SUPPLY OF CERTAIN RESOURCES IN AUSTRALIA
Table of Contents
Introduction......................................................................................................................................2
Summary highlights of the story......................................................................................................2
Economic theories and concept.......................................................................................................3
Recommendation.............................................................................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6

2DEMAND AND SUPPLY OF CERTAIN RESOURCES IN AUSTRALIA
Introduction
Availability of resources is the basics for production activity in the economy. Rich a
nation is natural resources greater is the scope for economic growth of the nation. Sometimes
despite having, plenty of natural resources country often lags behind the expected growth. An
example o such nation is Africa. Because of inability to extract the resources, the resources
remain unutilized. Therefore, proper resource management is crucial. In the paper, demand
supply management of resources in Australia is discussed.
Summary highlights of the story
Agricultural, mineral and human resources are basis for Australian production activity.
The analysis of primary resource is similar to general analysis. However, special attention
needed for mineral and human resources. In the stock of mineral resources, Australia encounters
problem in the domestic availability of natural gas. Natural gas is used as a primary raw material
in power plants. With a lack of supply of basic raw materials, power production is hampered.
Contraction in power supply increase price of electricity causing suffering to domestic
household. The problem is supply shortage is although created by large suppliers of LNG. This is
the main discussion topic of the article chosen for present analysis (dailytelegraph.com.au 2017).
The main force for supply shortage is the large-scale export of LNG. The international
market is a more lucrative place for business. A large share of natural gas was previously
supplied by Queensland alone. With growing attention to export, more than 58% of supplied gas
is now exported to big exporters like Shell, Origin and Santos (Lodhia et al. 2013). This
contributes to mismatch between supply and demand in the domestic target. In Australia, most of

3DEMAND AND SUPPLY OF CERTAIN RESOURCES IN AUSTRALIA
the power plants are directed to use natural gas that coal keeping in mind the clean energy target
of the state. In this situation if the main resource for power generation are used for meeting
external demand then there is an obvious supply crisis. Given the demand, the restricted supply
increases price largely. Despite paying a high price people in Australia cannot be secured with a
undisturbed power supply. Record suggest that domestic price for natural gas increased by 57%
in the last two years (Giurco et al. 2014). In the report, prediction for a future supply shortage is
also predicted for some major states in Australia. These states include New South Wales,
Victoria and South Australia. Another reason for high price in the energy market is the
movement of major suppliers as a cartel. They do so to stay in the international market by
recovering their loss at the cost of domestic producers.
Economic theories and concept
The problem that Australia is facing is directly connected with common economic
problem of lack of supply to meet the demand and resulted high price. Balance between supply
and demand is an important condition for smooth functioning of free market. Demand defines
buyers willingness to pay for a good in the market. Suppliers take their decision about how
much quantity they are willing to supply in the market (Ali et al. 2017). The parity between
buyers and suppliers decision determine the state of the market. In case where there is mismatch
between these, two the price will be either higher or lower than the price prevail under free
market condition. When there is a reduction in supply, then this is indicated by an inward shift in
the supply curve. However, demand cannot respond so quickly and in case of necessary good
demand does not change at all. To serve large number of consumers with a limited supply, price
increases rapidly. This is preciously what is happening is Australian market.

4DEMAND AND SUPPLY OF CERTAIN RESOURCES IN AUSTRALIA
Figure 1: effects of an inward shift in the supply curve
(Source: Rader 2014)
Before 1990, the position of Australia in international market is not so strong. As a result,
domestic resources are used only for meeting domestic demand. there was no problem in the
power sector . Both coal and natural gas were used to supply power for domestic and industrial
use. With economic progress, international relation strengthens and gives a boost to export. The
export of LNG increases (Moran and Kunz 2014). Many of the suppliers completely restrict their
domestic supply and only engage in exportation. Individual decision of some suppliers resulted
in a nationwide shortage of power and blackout becomes more frequent.
Another economic theory that needs to be evaluated is the impact of cartel in the market.
Oligopoly sellers are often interested in forming a cartel in order to enjoy a greater control in the
market (Currie, Peel and Peters 2016). Two or more large player in the market jointly takes the
decision regarding price and output. The firm having high production cost may supply a small

5DEMAND AND SUPPLY OF CERTAIN RESOURCES IN AUSTRALIA
quantity whereas firm having low cost supplies a greater quantity. Industry as a whole has the
joint supply and the firms enjoy equal industrial profit. In case of Australia, suppliers form cartel
to set a high price. The price in domestic market is often higher than that in the international
market (Rader 2014).
Recommendation
The present problem of mineral resource in Australia is the existing supply shortage and
high price. Regulation should be made to control price. Traditional methods like setting a price
ceiling may be one strategy. Another strategy to reduce price is to increase domestic supply by
reducing export. Government can impose a quota an export. Supply excess of domestic demand
should only be allowed for export. Instead of depending only on natural gas, alternative sources
for fuelling power plants should be encouraged. Use of modern emission efficient technology is
one way out in this regard.
Conclusion
The paper analyses demand and supply situation for mineral resources in Australia. There
is high mismatch between supply and demand in this industry. Supply fall short of demand
resulting in a high price. Increase in export is one reason for supply shortage. Close down of old
plants is another factor contributing to lack of power supply. Consumers are exposed to high
price and frequent blackouts. Regulation needs to be made to correct the situation. Suppliers
should give priority to domestic demand first. The problem, if not solved quickly then can
become even bigger and prevent economic progress.

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References
Ali, S.H., Giurco, D., Arndt, N., Nickless, E., Brown, G., Demetriades, A., Durrheim, R.,
Enriquez, M.A., Kinnaird, J., Littleboy, A. and Meinert, L.D., 2017. Mineral supply for
sustainable development requires resource governance. Nature, 543(7645), pp.367-372.
Currie, D., Peel, D. and Peters, W. eds., 2016. Microeconomic Analysis (Routledge Revivals):
Essays in Microeconomics and Economic Development. Routledge.
Dailytelegraph.com.au. (2017). Gas shortages could cause NSW blackouts. [online] Available at:
http://www.dailytelegraph.com.au/news/nsw/nsw-energy-crisis-gas-shortages-could-trigger-
widespread-blackouts/news-story/ce7284fa5bfe589215c57ea3d3d4d77b [Accessed 24 Aug.
2017].
Giurco, D., Littleboy, A., Boyle, T., Fyfe, J. and White, S., 2014. Circular economy: questions
for responsible minerals, additive manufacturing and recycling of metals. Resources, 3(2),
pp.432-453.
Lodhia, S.K., Moran, C., Kunz, N.C. and Huisingh, D., 2013. The sustainability agenda of the
minerals and energy supply and demand network: an integrative analysis of ecological, ethical,
economic, and technological dimensions.
Moran, C.J. and Kunz, N.C., 2014. Sustainability as it pertains to minerals and energy supply
and demand: a new interpretative perspective for assessing progress. Journal of cleaner
production, 84, pp.16-26.
Rader, T., 2014. Theory of microeconomics. Academic Press.

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