Oil executives warned that next winter could see a tighter energy supply and even higher prices than this winter.
Although a major shortage has been avoided in Europe as geopolitical pressures from the Russian invasion of Ukraine threaten energy supplies, oil and gas magnates said at a conference in the United Arab Emirates that next winter is now the primary cause for concern.
“We’ve got a difficult winter ahead, and subsequent to that we’ve got a more difficult winter in the year ahead of that, because the production that is available to Europe in the first half of 2023 is considerably less than the production we had available to us in the first half of 2022,” Vitol CEO Russell Hardy told CNBC. “So the consequences of energy shortage and therefore price escalation, all of the things that have been discussed here about the cost of living, the expectation of problems ahead, clearly need to be thought about in that context.”
European nations were forced to scramble for new power supplies after Russia severed natural gas shipments and the Nord Stream pipeline system sustained unprecedented damage from an unknown actor. Russia accounted for 40% of the European natural gas supply last year, a rate that had dropped to 9% as of three months ago. Germany, the continent’s largest economy, has seen dependence on Russian natural gas decrease from 55% to 35%.
“I think it has been addressed for this winter,” BP CEO Bernard Looney said about storage levels, even though some spend up to half of their disposable income on energy. “It’s the next winter I think many of us worry, in Europe, could be even more challenging.”
The European Union has adopted the official policy of becoming “a climate-neutral society” by 2050 in accordance with the European Green Deal and the Paris Agreement, leading ministers to encourage a rapid transition toward renewables. Many business magnates, including Tesla CEO Elon Musk and JPMorgan Chase CEO Jamie Dimon, have rejected such policies and noted that the global economy is not ready for an overnight pivot away from fossil fuels.
High energy prices have also impacted the United States. According to the most recent winter fuels outlook from the Energy Information Administration, the average American household primarily using natural gas for space heating will spend $931 on power from October to March, marking a $206 increase since last year.
The national average price for gasoline surpassed $5.00 per gallon this summer, even though prices at the pump are currently $3.76 per gallon, according to data from AAA, marking a nearly 58% increase since President Joe Biden assumed office at the beginning of last year. The administration has nevertheless defended its record on energy as Americans prepare to vote next week. White House Press Secretary Karine Jean-Pierre claimed last month that Americans are saving money on gasoline under Biden, failing to mention that prices were as low as $2.38 per gallon before he assumed office.
“Gas prices have fallen by $1.15 from their peak, which was not too long ago,” she told reporters at a press briefing. “The ninety-eighth consecutive-day decline this summer was fastest in over a decade. Every month, the typical two-driver family saves about $120 at the pump compared to where we were in mid-June. Every day, Americans save about $420 million at the pump compared to mid-June.”