Why is the AGL share price tumbling on Monday?

The AGL Energy Ltd (ASX: AGL) share price is down 2.88% in late morning trade, having earlier posted losses of 6.8%.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy company closed on Friday trading for $8.00 and are currently changing hands at $7.77 apiece.

It’s not just the AGL share price under pressure.

While the ASX 200 is down 0.7%, utilities stocks are broadly underperforming, as witnessed by the 4.01% fall in S&P/ASX 200 Utilities Index [ASX: XUJ] at this same time.

Here’s what’s happening.

Why are utilities stocks selling off today?

The AGL share price and other utilities stocks look to be under pressure following Friday’s announcement by Prime Minister Anthony Albanese of a pending price cap on domestic coal and gas sales.

On Thursday, 15 December, Parliament will vote on Labor’s plan to cap gas prices at $12 per gigajoule. The price for thermal coal (used to generate electricity) would be capped at $125 per tonne for the domestic market.

Those prices are well below what gas and coal producers have been receiving since energy prices rocketed in the wake of Russia’s invasion of Ukraine, resulting in some record profits for the companies.

Commenting on the planned price cap, Energy Minister Chris Bowen said (quoted by Bloomberg):

We were facing gas price rises next year of 36%, that’s not acceptable. Either you intervene and take the sting out of those price rises, or you don’t. We believe in intervening…

It’s Australian gas, under Australian soil and Australians should not be paying elevated war prices for that gas.

Bowen noted that the proposed price caps would not apply to exports or any new gas projects. He said if companies “want to make money from exports, that’s okay”.

With major energy stocks likely to come under pressure, as with the AGL share price today, not everyone is pleased with the price cap plan.

As Reuters reports, Australian Petroleum Production & Exploration Association CEO Samantha McCulloch said the price caps would reduce confidence and investment in energy projects and lead to lower supplies in the future. McCulloch called the plan a “fundamental dismantling” of the Australian gas market.

“This may be taken as a declaration of war on the gas industry on the east coast,” Credit Suisse analyst Saul Kavonic added.

AGL share price snapshot

Despite today’s dip, the AGL share price (pictured below) is up an impressive 32% over the past 12 months. That compares quite favourably to the 3% full-year loss posted by the ASX 200.

The post Why is the AGL share price tumbling on Monday? appeared first on The Motley Fool Australia.

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• Buying AGL shares for the dividends? Read this first
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• Here are the top 10 ASX 200 shares today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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