European consumers could face energy rationing this winter as costs continue to soar amid the risk of Russia cutting off gas supplies, Shell’s chief executive has warned.
“It will be a really tough winter in Europe,” Ben van Beurden told the Aurora spring conference in Oxford on Thursday. “We will all face very significant escalation in energy prices. In the worst case, Europe will need to ration its energy consumption.”
His warning came as retail energy suppliers urged the government to intervene again to keep UK bills in check, following a £15bn package of measures announced in May to ease the cost of living crisis, which includes £400 off energy bills for every household.
Prices are forecast to continue rising into the autumn, as uncertainty surrounds the extend to which Russia will continue to throttle supply. Van Beurden said there was “no way of telling” whether Russia would restart gas flows into Europe via the Nord Stream 1 pipeline after maintenance started on Monday. It is due to conclude on 21 July.
“Putin has surprised quite a few of us,” he said. “I feel disappointed by the outcomes. He has also shown that he better be taken seriously when he makes threats … For a long time we thought it was not in Russia’s interest to cut off Russia’s largest market. He is able and willing to weaponise supplies.”
Speaking on the sidelines of the Aurora conference, the Octopus Energy founder, Greg Jackson, told the Guardian that whoever wins the Conservative leadership race may have to immediately bring in more government help on bills.
“We will have a new prime minister who will start in September just after the level of the next price cap has been announced and just before it will be introduced,” he said.
“They may need to look at another intervention with further government measures. We welcome the support that was already announced, but if you look at the situation, wholesale prices are still so high.”
Last week, the research firm Cornwall Insight significantly raised its forecasts to show that the energy price cap in the UK was on track to rise to £3,244 a year in October 2022, in the next quarterly adjustment made by the regulator Ofgem.
The average UK household energy bill is estimated to be on track to reach more than £3,300 annually this winter as soaring wholesale energy costs are passed on to consumers.
ScottishPower’s chief executive, Keith Anderson, said: “Given the size of [Sunak’s] measures, it is hard to say they have not done enough. The challenge we have is that the £400 does look like it’s going to be swamped by the rise in the price cap.
“That puts us back to the option that we put forward. You give those that need it the most of a big top-slice chunk off their energy bills and allow that to be repaid over 10 years.”
Asked about the contest to become UK prime minister, Van Beurden said: “I hope there is no backtracking from net-zero ambitions. There is a lot of popular opinion out there that is sometimes not helpful.”
The Shell boss also commented on the energy profits levy on North Sea oil and gas operators. He said: “I would have liked to have seen incentives and allowances for those companies that actually invest in energy transition.”
Van Beurden compared setting carbon reduction targets to his personal fitness regime. He said: “I set a target, I go to the gym every morning, I skip breakfast and indeed I am losing kilos.
“My point is, targets only work if they are followed by action – you need both. This is true for losing weight and it is true for cutting carbon emissions …
“Don’t get me wrong, targets to reduce carbon emissions are necessary. The world needs them and I believe countries and companies that have not yet set ambitious targets should do so as fast as possible. But after targets are set, we all need to take the next step.” His comments come after Shell faced legal action over its carbon reduction strategy.
