The federal government's agreement with major east coast gas exporters to boost domestic supply will do little to bring down gas prices for local consumers, according to an economist.
National Australia Bank's global head of research Peter Jolly said gas prices are likely to trend higher, driven by international oil prices and movements in the Australian dollar.
Prime Minister Malcolm Turnbull and the three Queensland LNG ventures run by Shell, Origin Energy and Santos last week signed a deal forcing the gas exporters to make up any shortfall in Australia's east coast gas market in 2018 and 2019.
The government says its market intervention has been necessary to stave off potential domestic shortages and spiralling prices that have already tripled since 2014.
It has argued that ensuring higher gas supply will automatically bring down prices in the medium term.
But locking in gas supply is not the same thing as locking in prices, and Australia's domestic gas price is largely determined by developments in the Asia Pacific energy markets, Mr Jolly said.
"This being the case, even a big increase in domestic supply may have little impact on the domestic east coast gas price, which will be driven more by where the oil price and $A exchange rate go," he said.
He said the main reason for gas prices rising is not so much a lack of supply, but that the domestic gas market now has to compete with the export market.
"Basically, we are left with the conclusion that where the crude oil price goes so will the domestic gas price," Mr Jolly said.
NAB expects global crude prices to rise to $US58 a barrel by the end of 2018, from about $US51 currently, suggesting domestic gas prices will either remain flat or increase.
WHAT DETERMINES DOMESTIC GAS PRICES:
* Link to international crude oil price
* AUD/USD exchange rate
* Actual demand and supply in the gas market
