Europe faces years of energy rationing without Russian gas, the boss of Shell has warned.
Ben van Beurden said it was a “fantasy” to think that Europe’s energy crisis would be resolved soon and he warned that if Moscow were to cut off all supplies, life would be “very hard”.
“I do not think this crisis is going to be limited to just one winter,” the chief executive of Europe’s biggest oil and gas group told energy leaders at the ONS conference in Norway.
“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing, and through a very quick build out of alternatives that you may have [such as] alternative gas imports [and] hopefully alternative energy sources.”
The comments are among the bleakest yet from the Shell boss, who has warned repeatedly of a “really tough” winter and of the potential for rationing if all gas was cut off by Russia, which normally provides about 40% of European supplies.
The Times reports that prices for Britain for this winter closed on Friday at a record high of 827p per therm, more than 16 times higher than the average prices over the decade pre-crisis.
Soaring wholesale gas and power prices have already fed through to record household bills, which are due to increase by 80% t to £3,549 a year from October.
Breaking the link between gas and electricity
Meanwhile, Brussels is drawing up emergency plans to reduce the cost of energy.
Ursula von der Leyen, president of the European Commission, said the bloc needed an “emergency instrument” to cope with the crisis and would try to break the link between gas and electricity prices which amplifies the impact of gas shortages.
The move will increase the pressure on the UK to do the same, with ministers setting out similar plans in a review of electricity market arrangements published in July which is being reviewed by industry.
Electricity prices rise alongside the price of gas partly because so much electricity is still made in gas-fired power stations, more than 35% in the UK and in the EU.
However, under the electricity market design, the cost of gas-fired electricity often determines the overall wholesale price of electricity. This means even electricity that is relatively cheap to produce, such as wind and solar power, is expensive to buy if gas prices are high, pushing up costs for utilities and households.
It is this link that governments in both the UK and Europe want to break, possibly by creating separate markets for power produced by wind and solar or gas and coal.
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