The Woodside Energy Group Ltd (ASX: WDS) share price is down 1.83% during the lunch hour, at $34.70 per share.
This comes as investors eye the potential impact of fast-spreading COVID cases in China on energy demand. Concerns that saw Brent crude oil prices dip 4.4% overnight.
S&P/ASX 200 Index (ASX: XJO) energy share investors are also keeping an eye on the potential impact of the government price caps on gas, and how this might impact the Woodside share price.
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What's happening with the gas price caps?
In December, the government's proposal to cap the price of coal and gas sold in domestic markets passed through the Senate despite opposition from the crossbench.
The government made the move, citing concerns over soaring electricity costs in 2023 as gas prices rocketed in 2022 amid the Russian invasion of Ukraine.
According to the government website, the "emergency, temporary price cap on new domestic wholesale gas sales by east coast producers will be implemented for 12 months to help keep wholesale gas contract prices under control".
The government intends to set this cap at $12/GJ, noting it believes this is "a reasonable price allowing for the key costs of domestic supply, including a reasonable return on capital, for gas sourced from currently operational fields".
According to data from the Australian Competition and Consumer Commission, before Russia invaded Ukraine, 96% of the 289 domestic supply offers on the east coast in 2021 for supply in 2023 were below $12/GJ. The average offer came in at $9.20/GJ.
Gas from undeveloped fields will not be impacted by the price caps.
To date, the Woodside share price has largely shrugged off the price caps. Shares are down about 2.5% since the legislation passed the Senate.
Not that Woodside CEO Meg O'Neill is pleased about the caps.
O'Neill stated:
The policy will not address falling domestic gas supply and the increasingly critical role of gas in providing dispatchable power… We need to unlock gas supply now.
Woodside has been looking at options to increase supply, including through new LNG import terminals, exploration spending and further development on the east coast. Unfortunately, the proposed market intervention will make it very difficult for industry to economically invest to increase supply.
The final impact on the Woodside share price remains to be seen.
But I suspect that the company's performance will hinge more on global oil and gas prices than the temporarily, artificially suppressed domestic gas prices.
Woodside share price snapshot
As you can see in the chart below, the Woodside share price has enjoyed a strong year, up 53% over the past 12 months. For some context, the ASX 200 is down 7% over this same period.
