Oil climbs to $119 as Shell chief warns of prolonged supply squeeze
THE boss of Shell has warned that turbulence in oil markets is set to continue with supplies running low and a “fear factor” gripping energy markets.
Ben van Beurden said producers in the Opec cartel of oil producing countries do not have as much spare capacity as many observers thought, and markets are getting “ever tighter”.
The price of Brent crude rose 1.2pc yesterday for the fourth day in a row to $119 a barrel, meaning it is now 50pc higher than at the start of the year.
Russia’s war on Ukraine has caused turmoil in energy markets amid concerns that key supplies will be cut off by sanctions or in retaliation to them. Major producers such as Saudi Arabia and the United Arab Emirates also appear unlikely to be able to boost output significantly, and analysts believe that political unrest in Ecuador and Libya could tighten supply further.
Speaking in Singapore, Mr Van Beurden also said the oil and gas industry had not received enough investment over the previous three years.
High oil prices have pushed up prices at the pumps for motorists in the UK, with ministers ordering the competition watchdog to review the market amid concerns consumers are being ripped off.
However the Petrol Retailers Association (PRA), which represents inde- pendent sellers, yesterday warned that forcourts are also struggling, with many unable to cover their costs.
As many as 2,000 sites are at risk of collapse, it said, representing a quarter of the 8,380 forecourts in the UK.
Those exposed are generally smaller ones in rural areas who sell only about 1m litres per year, but are key to serving rural communities.
It comes as rates of fuel theft or drivers who cannot afford to pay have also climbed about 60pc compared to last year, with the industry estimated to have lost £20m since January.
“It is a serious point to consider that we could see more forecourts closing, compromising national fuel resilience and the communities they serve,” said Darren Briggs, chief executive of the Ascona Group.
Average petrol pump prices hit an alltime high of 191.42p per litre in the UK on Tuesday according to the RAC, while diesel was just short of a record 199.01p.
Simon Williams, the RAC’S fuel spokesman, said the rise in petrol prices came despite a fall in wholesale fuel prices in recent weeks. He said: “We can see absolutely no rhyme or reason why average forecourt prices are still going up. Drivers up and down the country have a right to know why they’re having to pay what they are for fuel.”
Gordon Balmer, executive director of the PRA, hit back, arguing that during June, average margins on petrol had been about 7p per litre and 3.5p on diesel, which was not enough to cover costs. “Prices are very volatile at the moment, we’re not making the sort of margins that we need to, and we remain competitive as we can be,” he added.
Mr Briggs noted prices at individual retailers would depend on when and at what price they bought their fuel, with huge variations. “There’ll be some sites going up in price this week, and there’ll be some sites going down this week.”
Fuel prices have been volatile amid a full or partial boycott on Russian oil in much of the West. Russia is the world’s second largest oil exporter with significant influence over market prices.
G7 leaders are considering introducing a price cap on Russian oil in an attempt to try to limit profits the Kremlin can make from its fuel trade. Mr Van Beurden said price caps would only work with broad participation and would be unsuccessful if only Europe, US and a few others agree.