City comment: Gas crisis could leave Shell hot under the collar

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Jay

OH F. Kennedy once said: “In a crisis, be aware of the danger – but recognize the opportunity.”

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For Shell CEO Ben van Burden and his colleagues, the opposite may be true: When taking advantage of opportunity, be aware of danger.

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The oil major told investors today that profits from its gas trading business are set to be “significantly higher,” thanks to rising prices. In the same update, Shell announced plans to return $5.5 billion to investors through buybacks.

The two are unrelated: Funds for the buyback come from the sale of a Texas oil business last year, not a gas bonanza. But the management should be wary of mixing the two with the public.

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The gas crisis is a permanent fixture of the front page at the moment. Half the supplier market is in disarray and the bill is set to rise. The government is in crisis talks with industry this week and additional assistance on domestic heating costs may be on the cards.

Politicians and the public will ponder over a villain in this saga. Anyone seen crafting it at the expense of cold pensioners and the taxpayer would be an easy target.

Shell can laudably argue that it is doing well only because of global market dynamics. The company is not a charity and it is not in its interest to sell gas to the UK at below market prices. It cannot help if wild price movements are creating the right trading environment.

That argument is likely to carry some water with the public. Van Burden needs a better story if the spotlight falls on him.

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