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Centrica’s CEO, Chris O’Shea, has indicated that rising household energy bills may be unavoidable if oil prices continue to stay elevated due to ongoing tensions linked to the Iran conflict. Speaking to the BBC, O’Shea highlighted that the closure of the Strait of Hormuz has had a much more profound impact on oil supply compared to gas. He also noted it remains premature to predict exactly how energy bills will be affected in the coming months.
Consultancy firm Cornwall Insight projects that energy bills in England, Scotland, and Wales may increase by an average of £332 starting in July, after a previous decrease of £117 in April thanks to the energy price cap. O’Shea warned that if the current conditions persist, this rise appears inevitable. Since the outbreak of conflict involving the US, Israel, and Iran, crude oil prices have surged approximately 45%, reaching $106 per barrel.
The Strait of Hormuz is a critical route with about 20% of the world’s oil passing through, but Iranian actions targeting shipping have effectively halted flow through this vital corridor. O’Shea pointed out, however, that the gas supply has only seen a 3-4% reduction as a consequence of the strait’s closure. Consequently, he expects the impact on electricity bills to be less severe than on petrol prices, stating, “my gut feel is that you’ll see more of an impact of this in the petrol pumps than you will in bills.”
Regarding government assistance with energy costs, O’Shea advocated for targeted support measures rather than broad-based aid. Meanwhile, Housing Secretary Steve Reed revealed that the government has already introduced a £53 million support package aimed at households grappling with steep rises in heating oil prices. A high-level emergency meeting involving the prime minister, senior ministers, and the Bank of England governor is scheduled to discuss potential steps to address the situation and its repercussions on the UK’s cost of living.
The debate over ways to alleviate energy price increases follows recommendations from the cost-of-living tsar, Lord Walker, who suggested temporary profit caps on energy firms and petrol stations as oil prices climb. Reed, however, dismissed the need for such caps at present, emphasizing that the government is continuously monitoring the situation and prepared to intervene as necessary in order to keep bills manageable.
O’Shea expressed skepticism about the feasibility of further profit caps given the existing Energy Profits Levy—commonly referred to as the windfall tax—that imposes a 78% tax rate on North Sea oil and gas extraction profits. Introduced after Russia’s invasion of Ukraine in 2022 under a Conservative government and extended by Labour until March 2030, this levy already captures a significant portion of industry earnings. As O’Shea put it, “If you’ve got a situation where the Exchequer takes four fifths of what you’re making, I’m not sure there’s much more room for manoeuvre.”
Besides tax measures, O’Shea recommended that the government permit increased oil and gas exploration in the North Sea, coupled with expanded gas and battery storage capacities and enhanced renewable energy production. He cautioned that while none of these alone would completely resolve the issue, collectively they could help reduce costs. He added that gas prices are largely determined by global markets regardless of source and acknowledged environmental concerns about further fossil fuel development but said that utilizing available resources “makes sense” even if it is not a “silver bullet.”
Read the full article from The BBC here: Read More
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