Europe’s Energy Crunch

Soaring Profits Are a Feature of Europe's Energy Crisis

February 2, 2023, 2:00 PM UTC

One effect of the energy crunch has become clear: Companies that sell power, oil and gas are making a fortune. And there may be more to come when a European Union ban on Russian fuels comes into place this month.

Shell Plc on Thursday became the latest to report record earnings due to soaring energy prices. Exxon Mobil Corp. and Chevron Corp. did the same in recent days. UK-based utilities Centrica Plc and SSE Plc, and Germany's RWE AG, have also announced massive profits.

Source: Bloomberg News analysis of third-party data. A full methodology note is included at the bottom of the page.

The companies are enjoying a windfall largely because of a supply squeeze and the efforts to address it. In Europe, Russia cut natural gas shipments to the region, boosting both gas and power prices. To fill the gap, the continent is leaning on imports of liquefied natural gas. Shell's nearly $40 billion profit last year was helped in part by its unit that produces and trades LNG.

LNG Lifeline

Elevated imports have helped Europe manage its energy crisis

Source: Bloomberg

European refiners may also see a boost after the EU's limits on seaborne shipments of Russian fuels take effect on Feb. 5, according to an analysis by BloombergNEF. Refining margins on the continent will be elevated at least through September, it noted.

Russia is the continent's largest external supplier of diesel, and European buyers are now scouring other regions to fill the gap.

While higher energy prices are great for those selling it, they're disastrous for consumers -- fueling historic inflation, broadening the wealth gap, and in the UK, contributing to a wave of labor unrest over a cost-of-living crisis.

Shell's earnings, like those of other energy companies recently, has provoked a backlash. The London-based company paid $100 million in windfall tax last year, but critics in political, labor and academic circles say it's hardly enough.

Keep an eye on other earnings in the coming days. European majors BP Plc and TotalEnergies SE are set to report next week.

Previous Posts on Europe’s Energy Crunch Blog

Feb. 1: Europe Defies Expectations With Help From Plunging Energy Prices

Jan. 31: Europe Is Amazingly Quick to Cut Fossil Fuels When It Tries

Jan. 30: Europe’s Growing Dependence on Costly LNG Isn't Inevitable

More energy coverage

Shell CEO Sees a World ‘Desperately in Need’ of Natural Gas

EU Must Extend Gas-Demand Cuts Before Next Winter, Bruegel Says

European Gas Falls Again With Focus on Demand, LNG Shipments

Coordinating editor: James Herron

Data analysis by: Leonid Bershidsky

Energy Crisis Index methodology:

The Bloomberg Energy Crisis Index measures the level of stress on energy systems across a selection of major European economies using five parameters: gas storage, percentage full (data sourced from Gas Infrastructure Europe); power load, in GW (from ENTSO-E); gas and power prices per MWh for the day ahead (from relevant exchanges or brokers); and temperature forecast for the day ahead (based on Weather Company data using the ECMWF model.) On the graphic, gas and power prices in local currencies are displayed in euros.

For each parameter, data is adjusted for seasonal variation and a z-score is calculated for every observation for the last four years (one-year in the case of power and gas prices). For the most recent z-score, the percentile score is calculated.

For gas storage and weather, the 100th percentile (0% of z-scores in the last two years are higher) is the “best” result, so the number of points equals 100 minus the percentile. For the power load and the day-ahead gas and power prices, the 0th percentile (100% of z-scores in the last two years are lower) is the “best” result, so the number of points equals the percentile. The average of all variables gives the overall score for each country, with 0 representing the lowest stress and 100 the highest.

Europe’s Energy Crunch

LNG Lifeline

More On Bloomberg