Why does Shell say demand cuts are partly “bad news”?

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Demand Cuts Lead to "Bad News" Due to Industrial Rationalisation

Shell's Chief Executive Officer, Ben van Beurden, has indicated that while Europe's efforts to cut energy demand have been effective, a significant portion of this reduction stems from "switching off industry." This industrial rationalisation, if sustained, carries the risk of becoming permanent, potentially leading to adverse economic consequences and political pressures within Europe.
Reduction Achieved by Halting Industrial Operations

Europe has significantly reduced its energy consumption following the disruption of 120 million tonnes of Russian gas annually. However, a considerable part of this demand reduction has been achieved by shutting down industrial operations, such as fertiliser plants and scaling back petrochemical production. This industrial rationalisation, driven by the energy crisis exacerbated by the conflict in Ukraine, is a cause for concern.
Risk of Permanent Industrial Rationalisation

Van Beurden cautioned that if these industrial cutbacks persist for an extended period, they could transition from temporary measures to permanent changes. This permanent industrial rationalisation, occurring amidst broader economic challenges, poses substantial risks and could place considerable pressure on European economies and their political systems.
Long-Term Economic and Political Implications

While some might view the demand reduction as a success, van Beurden highlighted that a portion of it represents "bad news" for the long term. The abrupt scale of industrial rationalisation, coupled with existing economic difficulties, is expected to create significant pressure on European economies and potentially destabilise the political landscape.
Shell's Investment in Qatar's LNG Expansion

This discussion on Europe's energy challenges occurred as Shell solidified its role in global energy markets by agreeing to a 9.3 per cent stake in Qatar Energy's North Field South project. This project is a key component of Qatar's plan to boost its liquefied natural gas (LNG) production by 50 per cent over the next five years, underscoring the ongoing global demand for natural gas.

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Why does Shell say demand cuts are partly “bad news”?

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