Europe’s plans to cap bills for consumers is not a long-term solution to the global energy crisis, argued Aramco chief executive Amin Nasser.
The head of the Saudi state oil giant told a forum in Switzerland that the energy crisis has been largely spurred by underinvestment in fossil fuel generation across developed economies in the West.
He said: “Freezing or capping energy bills might help consumers in the short term, but it does not address the real causes and is not the long-term solution, and taxing companies when you want them to increase production is clearly not helpful.”
In his view, European governments had failed to back domestic hydrocarbons during the transition to alternatives such as renewables, which were not yet ready to meet consumer energy needs.
Nasser believed this was the central issue rather than the continued conflict in Ukraine, following Russia’s invasion of the country in February.
He said: “The conflict in Ukraine has certainly intensified the effects of the energy crisis, but it is not the root cause. Sadly, even if the conflict stopped today as we all wish, the crisis would not end.”
While he did not suggest the energy crisis meant climate goals had to change, he believed it exposed the need for a more viable energy transition plan.
Nasser said: “The best help that policy makers and every stakeholder can offer is to unite the world around a much more credible new transition plan.”
Aramco has been working to lower its upstream carbon intensity, gas flaring and methane intensity while upping efforts to advance carbon capture technologies, he revealed.
Europe scrambles to secure supplies this winter
Wholesale prices have spiked to record highs this year, driven by rallies across oil and gas benchmarks, amid fears over supply shortages driven by rebounding post-pandemic demand and Russia’s invasion of Ukraine.
Governments across Europe have since ploughed hundreds of billions of euros into tax cuts, handouts and subsidies to tackle the energy crisis, which is driving up inflation.
Countries including Germany and Spain have brought in rationing measures and public information campaigns, with energy bills climbing to eye-watering highs ahead of winter.
This includes the UK, which has unveiled a historic £150bn support package, more than double the furlough scheme rolled out during the pandemic.
Meanwhile, under European Union (EU) plans announced last week, excessive profits from energy companies would be skimmed off and redistributed to ease the burden on consumers.
The bloc is also racing top-up supplies, to stave off the possibility of blackouts if Russia further cuts supplies into Europe.
Kremlin-backed gas giant Gazprom halted flows via the Nord Stream 1 pipeline last month due to alleged maintenance issues, including an oil leak, which the EU has dismissed as a pretext for cutting gas flows in retaliation to Western sanctions.
Storage levels across the bloc currently average 86 per cent according to data from ASGI – meeting the bloc’s target of 80 per cent this month.
Aramco has been investing to raise the country’s oil capacity to 13m barrels per day by 2027.
The company is the leading fossil fuel producer in Saudi Arabia, a leading member of OPEC – the world’s most influential oil cartel.
The group has persistently missed pledged increases in output this year amid capacity issues and fears of a supply glut if demand collapses.
Nasser argued that global spare capacity is at about one and a half percent of global demand and oil inventories are low.
He further suggested there is a “fear factor” is still preventing critical oil and gas investments and causing long-term projects to “shrink.”
The energy boss explained: “When the global economy recovers, we can expect demand to rebound further, eliminating the little spare oil production capacity out there … that is why I am seriously concerned.”