The recent earthquake which has devastated Japan could also have serious consequences for Australia’s energy exports to the region, according to UQ economist Dr Liam Wagner.
Dr Wagner, a research fellow and energy economist in the UQ School of Economics, said the prospect of demand falling for energy resources was of major concern to the Australian economy.
“World energy markets have responded very quickly to the prospect of lower demand from Japan, with oil markets in New York falling to $99/barrel before concerns over Middle East stability pushed prices just above $100/bbl by the closing bell,” Dr Wagner said.
“Twenty-three percent of Australia’s energy exports are to Japan and a significant shift in that demand could have serious consequences for Australia’s coal and burgeoning Liquid Natural Gas (LNG) exports.”
The resurgence in demand for Australia’s coal and natural gas has been a major driving force in our economic recovery, with approximately 40 percent of coal and approximately 65 percent of natural gas exported from Australia shipped to Japan.
“The resources industry will certainly start to feel the effects of “force majeure” clauses in delivery contracts in the coming months,” Dr Wagner said.
“While it is still uncertain how this major natural disaster will affect our exports markets in the future, it will certainly leave its mark on our economic recovery.”
The International Energy Agency has indicated that Japan’s demand for energy represents 4.5 percent of world primary energy demand. Its local electricity production from nuclear power represents 10 percent of the world’s use of nuclear energy.
“Australian energy markets are braced for a shock as the abrupt change in energy production could affect their commodity markets from the extent of this challenging time,” Dr Wagner said.
“The final indicator will be how adversely the Japanese economy is affected after the light of Fridays earthquake.”
Media: Rachel Tolley (+61 7 3365 4482, r.tolley@uq.edu.au)
