Gas market in crisis: competition chief

The head of the Australian Competition and Consumer Commission says there is a crisis in the market supplying gas to industry.

The competition regulator is warning of business closures as it begins an investigation of the gas supply market.

"We think there is a crisis in the gas market, particularly in relation to industry that needs gas, either as a feedstock or a source of energy," Australian Competition and Consumer Commission chairman Rod Sims told The Australian on Friday.

"I do think companies will go out of business because of this and I think that will be a crying shame."

Mr Sims said the situation in the east-coast gas market had deteriorated in the past year, leaving businesses faced with a "worst-case scenario''.

The federal government has instructed the ACCC to investigate the industry, after players in the market failed to come up with a solution following two rounds of talks with Prime Minister Malcolm Turnbull and senior ministers.

The commission completed a year-long investigation into the gas market this time last year.

"We thought the market was going to get tight but this is worse than we expected," he said.