Energy blackouts and rationing: UK Government questioned over fuel plans amid "worst supply shock the world has ever seen"

The UK has a "strong and diverse range" of energy supplies and is "absolutely not" planning for energy blackouts or rationing amid the on-going military conflict in the Middle East and the "worst supply shock the world has ever seen" in crude oil, a Minister has said. Energy minister Michael Shanks told the Energy Security and Net Zero Committee on Wednesday (March 25) that UK supplies are operating as normal.

The update came amid Iran’s effective blockade of the Strait of Hormuz, a vital shipping route for oil and gas, after it was attacked by the US and Israel more than three weeks ago.

Asked by the committee if ministers are planning for blackouts or rationing, Mr Shanks said: “We’re absolutely not. And look, that’s not from a point of us not taking very seriously the risks that there are at the moment and managing the situation carefully. But we are monitoring it, and all the data that we have is that because we’ve got a strong and diverse range of supplies, we’re not concerned about it. It doesn’t mean we don’t take it very seriously.”

Earlier, the committee heard how Asian markets are seeing a “big drought” of oil and gas on the horizon because of the closure of the Strait of Hormuz. Equinor, a major energy supplier to Europe, said a number of its vessels were caught up in the disruption.

Alex Grant, Equinor’s UK country manager, told MPs: “We have a fleet of around 80 vessels at any one point – we have vessels that are caught up in the Gulf situation. I have no better view on anyone else, which is when will the straits reopen.

“There is no shortage even in Asia, yet. Vessels take 25 days or so to sail there so at the moment they’re still just about receiving the same amount of oil that they’ve always received.

“But they can see on the horizon a big drought. Suddenly nothing coming. And they don’t know when that tunnel ends because they haven’t seen the straits reopen. The stress in Asia, a physical shortage problem that they can see coming, is felt much more acutely than it is here.”

Alan Grant, senior vice president of refining, chemicals and oil markets for energy consultancy Wood Mackenzie, told the committee the war was creating the “worst supply shock there’s ever been” in terms of crude oil.

“It is a material shock,” he told the MPs. “What the markets are very much focused on is what is flowing out of the straits – we’re seeing refiners in Asia scrambling to secure supply and countries in Asia try and manage demand. What we don’t know is when the straits reopen, how fast the ships that are currently loaded and waiting there can flow out.”

He added that the world was “slightly split at the moment” with Asian markets in particular facing higher prices as they look for alternative suppliers.

“At the moment, refiners in Europe are doing quite well because product prices have really lifted compared to crude,” he said. “Refiners in Asia, not at all – they’re competing so hard for the crude that’s available, they’re kind of destroying their earnings.”

Elsewhere, Professor Nick Butler, a former vice president of BP, told Times Radio there could be oil and gas shortages within two to three weeks and that the government should be planning how to handle it. “There will be shortages and I think the Government now should be seriously planning how they’re going to handle that and part of that is maximising supply,” he said.

“So developing the North Sea to the extent of the reserves that are there, that’s at least three or four billion barrels of oil and gas and another 10 to 12 of resources that could possibly be developed," Prof Butler added. I think we are going to need that and the Government should have a sense of urgency in getting the industry going again.”