Shell Eyes North Sea Oil And Gas Drilling As Crude Hits $118 A Barrel
Shell is said to be reconsidering its decision to pull out of a proposed oil field off the coast of Scotland as Britain tries to shore up its energy security while Putin’s invasion of Ukraine sends fuel prices soaring and experts warned that the UK cost of living crisis ‘hasn’t arrived yet’ because inflation has higher to go. [bold, links added]
Work on the proposed Cambo oilfield development off the west coast of Shetland was paused in December after the energy company decided to withdraw from the project, concluding the economic case for investment was ‘not strong enough’.
Shell made the decision last year to withdraw when the price of crude oil was under $70 a barrel. Russia’s attack on Ukraine and the chaos that has followed means that that price hit $130 earlier this month and is currently at $118.
Figures from data firm Experian Catalist show the average price of a liter of fuel at UK forecourts on Sunday was 167p for petrol and 179p for diesel. This is an increase of 18p for petrol and 26p for diesel over the past month.
Over the weekend Boris Johnson issued a passionate defense of his plans to drill for more oil and gas in British waters off Scotland, insisting it will not undermine the fight against climate change and his net-zero credentials.
In November, Scotland’s First Minister Nicola Sturgeon said the Cambo project should not go ahead.
Today sources have told the BBC that although Shell’s official position remains the same, it did acknowledge the ‘economic, political and regulatory environment had changed enormously‘ in the three months since Shell announced it was pulling out of the project.
Environmental groups have long opposed the proposed field, warning it would jeopardize hundreds of species in the ocean.
Shell pulled out last December following months of pressure from opposition parties and campaigners for the Scottish Government to make its position on Cambo clear.
But industry body Oil and Gas UK previously said blocking long-planned energy projects like Cambo would risk leaving the UK at the mercy of global energy shortages.
It came as former Sainsbury’s boss Justin King today warned the cost of living crisis is ‘yet to arrive’ and predicts the real pain will begin next month, adding: ‘The rise in energy bills will hit people hard, closely followed by the rise in National Insurance’.
Oil prices have reached $118-a-barrel today – just six days after it was under $100. A week before that it peaked at close to $130 after Russia invaded Ukraine.
Adding to the pressure on prices, Saudi Arabia warned that Yemeni rebel attacks on its oil facilities pose a ‘direct threat’ to global supplies after Red Sea facilities belonging to giant Saudi Aramco were targeted.
The surge in oil prices has been a driver of turmoil on world markets in recent weeks as demand surges owing to economic reopenings just as supplies are strained.
That, along with a spike in the cost of other key commodities, such as metals and wheat, caused by the war, has sent inflation rocketing and caused a headache for central banks already trying to wind down pandemic-era monetary policies.
‘It seems energy traders are growing more confident that supply shortages are just around the corner,’ warned OANDA’s Edward Moya.
‘China’s decision to avoid broad lockdowns is also helping oil prices as the short-term crude demand hit should be temporary. The oil rollercoaster ride remains a geopolitical trade and right now it seems the risks are growing and that could push crude prices higher.’
There is a growing fear that the global economy could endure a period of stagflation in which prices soar but growth stalls.
Rishi Sunak is poised to deliver a last-minute cut to fuel duty this week amid warnings it will be ‘too little’ to head off a devastating cost of living crisis.
The Chancellor, who had originally hoped to avoid major spending measures in Wednesday’s mini-Budget, is now considering a temporary cut in fuel duty of up to 5p per liter in the wake of the Ukraine crisis.
Mr. Sunak hinted at the move yesterday, saying he was determined the cost of filling up a car should not become ‘prohibitively expensive’.
Speaking ahead of Wednesday’s ‘spring statement’ on the economy, the Chancellor said he would ‘stand by’ hard-pressed families, but warned he could not fully offset the impact of soaring prices.
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