Why is the Origin Energy share price dumping 8% on Monday?

The Origin Energy Ltd (ASX: ORG) share price is taking a beating today, down 8% in afternoon trading.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy company closed on Friday trading at $7.80 and are currently trading for $7.18.

That sees the Origin Energy share price sharply underperforming the ASX 200, which is down 0.6% at this same time.

The utilities sector, however, is broadly facing some stiffer headwinds on Monday. The AGL Energy Limited (ASX: AGL) share price is down 2.3% and the S&P/ASX 200 Utilities Index [ASX: XUJ] down 4%.

Here’s what ASX 200 investors are considering.

Energy price caps could become law on Thursday

On Friday prime minister Anthony Albanese announced the government’s planned rollout of price caps for domestic coal and gas sales. An announcement likely pressuring the Origin Energy share price today.

Parliament will meet this Thursday to vote on the proposal. If passed, it will see gas prices in the domestic market capped at $12 per gigajoule. Thermal coal, which is used to generate electricity, will be capped at $125 per tonne within Australia.

Commenting on the government’s rationale for the price caps, Albanese said (quoted by ABC News):

Extraordinary times call for extraordinary measures. And we know with the Russian invasion of Ukraine, what we’ve seen is a massive increase in global energy prices. And because of Australia not investing in enough of our own energy assets, what we have is a vulnerability to those international price movements.

Energy minister Chris Bowen added, “It’s Australian gas, under Australian soil and Australians should not be paying elevated war prices for that gas.”

The price caps and coal and gas won’t be levelled on exports, or on new gas fields. Bowen said if energy companies “want to make money from exports, that’s okay”.

But with the Origin Energy share price and other energy providers already facing some headwinds, the government’s plan doesn’t enjoy unanimous support.

“What the government needs to do is drive more supply of gas into the marketplace,” opposition leader Peter Dutton said.

Australian Petroleum Production & Exploration Association CEO, Samantha McCulloch, also sounded off against the price caps.

According to McCulloch (courtesy of ABC News):

A gas price cap will force prices higher for households and businesses because it will kill investment confidence and reduce future supply…

This heavy-handed, radical intervention has been conducted with no prior consultation with industry to consider specific measures and warn of potential risks to Australia.

Origin Energy share price snapshot

Despite today’s fall, the Origin Energy share price (as seen in the chart below) remains up 42% over the past 12 months.

The post Why is the Origin Energy share price dumping 8% on Monday? appeared first on The Motley Fool Australia.

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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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