Producers have warned a proposed mandatory code of conduct for the wholesale gas market will send prices even higher.
The code aims to ensure east coast gas users can access supplies at reasonable prices and terms after price spikes and years of work by the competition watchdog to make the market more fair.
The Australian Petroleum Production and Exploration Association in a submission to the federal government released on Thursday warns the proposal will stop the development of new gas fields and increase prices.
"These are the worst possible reforms at the worst possible time for Australia's cleaner energy future," APPEA chief executive Samantha McCulloch said.
The Australian Competition and Consumer Commission has warned of gas shortfalls later this decade and recommended extra supply to avoid upward pressure on domestic gas and electricity prices.
But APPEA says the proposed code risks doing the opposite - undermining the case for new investment and creating a supply crunch.
"As with the introduction of the temporary price cap, when markets froze and investment was spooked, the proposed mandatory code risks causing maximum disruption with minimal benefit to Australians," Ms McCulloch said.
Treasurer Jim Chalmers has said new sources of supply from undeveloped gas fields will be covered by a reasonable pricing provision, not a price cap, to ensure incentives to invest in new supply are maintained.
The industry body has recommended sticking to the principles behind the code endorsed by the federal government last September.
That code was never given a chance to work and was effectively torn up 27 days later, Ms McCulloch said.
The industry has also recommended avoiding permanent price controls and wants a flexible arbitration process to resolve disputes.
Ms McCulloch said the government could set the price at whatever they consider reasonable, with the option to change the rules at any time.
