Shell CEO: Windfall Profit Taxes 'Inevitable'

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As European consumers struggle with sky-high energy prices, Shell CEO Ben van Beurden says energy companies should accept that windfall taxes are "inevitable."

"You cannot have a market that behaves in such a way that … is going to damage a significant part of society," Van Beurden told the Energy Intelligence Forum in London.

"Some way or another, there needs to be government intervention … that somehow results in protecting the poorest," he said. "That ... may then mean that governments need to tax people in this room to pay for it."

Van Beurden acknowledged that such intervention can be done "smartly" or "not so smartly." But at the end of the day, he sees additional taxes on his industry as a "societal reality" that is "inevitable."

His comments come as the EU and individual European countries have been discussing or implementing so-called windfall taxes on energy company profits that have been boosted by record natural gas and electricity prices.

Van Beurden pushed back against the notion that high energy prices should be left to fix themselves — via demand destruction — given the magnitude of the financial pain that Europeans are suffering as winter approaches.

After all, he noted, the continent has experienced many periods of $80-plus oil, but there is no precedent for recent natural gas prices equivalent to $300 oil as a result of the sharp fall in Russian gas supplies to Europe.

Protests have broken out across Europe in response to eye-watering energy prices and wider inflation pressures, while the continent has also seen dozens of industrial plants close because of exorbitant energy costs.

The EU has moved quickly to build up natural gas inventories to ensure sufficient supplies this winter and avoid even higher prices.

But colder-than-expected weather could again send prices to new heights, further pressuring economies and the most vulnerable households.

Market Intervention

The outgoing Shell boss is far more skeptical — and worried — about potential government actions that involve capping or modifying prices.

"It's very difficult to really understand the unintended consequences of market interventions, particularly when they are on exchanges," Van Beurden said. He called such interventions "one of the biggest risks we're facing as an industry."

G7 countries are planning a coordinated price cap for Russian oil as an EU ban on Russian crude imports (and on insurance and financing for Russian oil cargoes) takes effect in December, followed by a ban on Russian products imports in February.

EU and G7 countries provide insurance and financing to around 90% of the global fleet of oil tankers, and the price cap and associated measures are meant to reduce Moscow's oil revenues without limiting the flow of Russian oil to the market

EU nations are separately debating a possible price cap on the continent's wholesale gas prices, but that idea has not gained the required level of support so far.

Van Beurden said he hoped governments will consult with energy companies before green-lighting such interventions to fully understand the potential consequences

He is not alone in voicing such concerns.

Policy and Regulation, Gas Prices, ENERGY INTELLIGENCE FORUM 2022
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