MELBOURNE, Dec 13 (Reuters) - The shortfall in Australia's gas supply has eased, the country's consumer watchdog said on Wednesday, but warned that prices remained high due to a lack of competition in supply, limited pipeline space and high transport costs.
The nation's gas sector has come under scrutiny as soaring prices and short supply hurt households and threaten manufacturing jobs, stoking political concern ahead of state and federal elections over the next 18 months.
Pressure from the government on three east coast liquefied natural gas (LNG) exporters to step up sales into the local market has helped plug a supply gap for 2018, the Australian Competition and Consumer Commission said in its latest update on a gas market inquiry.
In September, the commission and Australia's energy market operator had flagged a supply gap of up to 17 percent of demand in 2018.
They now see a potential surplus in the best case, with a potential shortfall of only 33 petajoules, or 5 percent of domestic demand, in the worst case.
"However, the gas supply-demand balance in the market remains tight," the commission said.
In a sign that pressure from regulators and the government has started working, the watchdog said gas prices offered to businesses and industrial users have dropped to between A$8 ($6.05) and A$12 from a peak of A$16 a gigajoule in early 2017.
Wholesale prices set by producers averaged A$9.74 a gigajoule between June and November, which the commission said was at the upper end or higher than its estimate of a fair price between A$6.55 and A$9.93, based on LNG export prices.
It said gas users in the southern states are dependent on extra supply transported by pipeline from the state of Queensland, which adds A$2 to A$4 a gigajoule to the prices they pay, if they can access pipeline space at all.
It also noted that the nation's two largest energy retailers, Origin Energy and AGL Energy, have booked a "significant proportion" of the capacity on pipelines from Queensland.
It said there was no evidence they were withholding spare pipeline capacity, but said it would continue to ensure that others were getting access to any spare capacity "on reasonable terms." ($1 = 1.3221 Australian dollars) (Reporting by Sonali Paul; Editing by Joseph Radford)