Gas and oil could be rationed in the UK amid 'crazy' price increases, MPs warned

Oil and gas could be rationed in the UK to help counter the growing global energy crisis, MPs have been warned.

Petrol has hit more than £1.70 a litre at the pumps, and experts have warned that household energy bills could surpass £3,000 a year – a doubling of prices – amid a worsening cost-of-living crisis.

Russia's invasion of Ukraine is a driving factor of energy price volatility in Europe as relations between the West and Moscow deteriorate.

The US, UK and EU have unveiled a growing list of sanctions, including on the import of Russian oil and gas – although Europe has stopped short off an outright ban and is instead hoping to phase out its reliance on Moscow in the coming months.

While Russia only provides 3% of the UK's gas and 8% of the UK's oil, it provides around 40% of Europe's gas, and more than 25% of its oil, meaning any increase in prices on the continent will have a significant knock-on effect elsewhere.

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At a Treasury select committee in parliament on Monday, Dr Amrita Sen, director of research at Energy Aspects, told MPs that the rationing of diesel and gas could be on the horizon as a result of supply issues and growing instability in energy markets.

She warned that parts of Europe may be facing rationing on diesel by April, and that in countries like Germany, BP and Shell have already reduced sales of diesel to wholesale customers.

"I think diesel is where we fear rationing could come as soon as end of this month in Germany," Sen said. "And I think you are you could absolutely see repercussions of that in the UK as well.

"The price of diesel last week was $180 already, and that’s why some of the rationing in some of the markets could come before even the headline oil price gets to those crazy levels."

Sen warned competition for energy on the global market, where "every price or every barrel is getting priced higher and higher", could also trigger rationing at UK refineries.

"You could actually see UK refineries not being able to pay up that much, and therefore having to reduce production and therefore then - you know - that’s where the rationing comes in," she said.

The director of research also warned that gas was not immune from the risks of rationing.

"[The Treasury] would potentially have to subsidise households by anywhere between £30bn to £62bn more, just because of the [energy] price cap that you’re using versus what the market is right now," she said.

"So effectively, long story short, what I’m saying is that governments will probably have to step in for rationing because not every industry and not every household gets the same price."

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Last week, energy secretary Kwasi Kwarteng announced the UK will ban Russian oil imports by the end of 2022, risking pushing oil prices higher domestically. However, Boris Johnson has pledged to lay out an "energy supply strategy" in response to the crisis in the coming days.

Nuclear power, a massive expansion of renewables such as wind and solar power, and the return of fracking are believed to be among the options under discussion

"It will take us on a road to building a stronger more resilient British energy system. It will increase the growing pressure on Russia’s economy," Kwarteng told MPs on Wednesday.

"And it will ultimately hamper Russia’s ability to impose further misery on the Ukrainian people."

On Monday, Labour accused the government of being "oblivious" to rising prices, warning people could be paying £400 more per year due to surging oil price and continued calls for more support for consumers.

"The government are sitting back either completely indifferent or completely oblivious," said shadow transport secretary Louise Haigh.