The current energy crisis has again demonstrated how quickly gas markets can tighten and prices spike. However, short-term volatility should not be confused with long-term structural trends. If countries implement their current climate commitments, the world is on track for peak warming of 1.8°C to 2°C by 2100. For Australia, one of the world's largest LNG exporters, this has consequences. As global gas demand plateaus and declines, LNG falls faster than overall gas consumption, displaced first as importing economies prioritise cheaper domestic production and pipeline supply. At the same time, a wave of new low-cost liquefaction capacity from the US and Qatar is coming online this decade, creating structural oversupply across all warming scenarios examined. In an oversupplied market, prices converge toward the short-run marginal cost of the lowest-cost supplier needed to clear the market. Australia, with high average production and liquefaction costs among major exporters, is not that supplier. Our analysis suggests that Australia's existing long-term contracts, most of which expire between the mid-2030s and 2040, may represent the upper bound of what the country can sell internationally. This is the scenario investors and policymakers should be stress-testing against.
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A 3-page summary is here.