One of Europe’s largest energy companies, the boss of one, has warned that rising gas and electricity prices will not go away and that consumers shouldn’t expect them to return at levels before Russia invaded Ukraine.
Anders Opedal is the chief executive officer of Norway’s state-owned oil company Equinor. He said that bills will likely remain high due to factors such as windfall taxes and large amounts energy companies must invest in order to transition from fossil fuels to cleaner alternatives.
The Guardian reported in October that Shell and BP, two of the largest oil companies in the world, had made profits of almost PS150bn in the first nine month last year. This was due to the rise in energy prices caused by the conflict in Ukraine.
Although wholesale gas prices have fallen to pre-Ukraine War levels in recent weeks, Opedal stated that bills will not fall to their historical levels of around PS1,300 per year, due to the Russian war.
The government’s energy price guarantee means that energy bills in the UK currently exceed this figure. A typical household pays approximately PS2,500 per year and will rise to PS3,000 per year starting April.
Opedal said that he had seen a complete rewiring in Europe’s energy system. We need more renewables. This will require significant investment, and these investments must be paid for. My guess is that energy bills will be somewhat higher than they were in the past, but less volatile than today.
He said, “We must treat energy as something that’s not abundant.” In the past, we have had lots of cheap energy and probably wasted some. We need to ensure that we make the right investments now and everyone uses as little energy as they can.
Opedal stated that the UK’s windfall tax for energy companies, which rose from 25% to 35% in March, was “affecting the way we judge each project in the UK.”
He said, “We need to consider what the tax level is in relation to all other risks.” What will the impact of a tax change on our projects? Is the project strong enough to withstand another tax change? When making a decision, we need to consider that.
To increase its energy supply, Centrica, British Gas’s owner, signed a major supply agreement with Equinor in June. This three-year agreement increased Centrica’s supply contract with Equinor by more than 10bn cubic meters per year, or about 12% of Britain’s total gas demand.