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Echoes of History: Lessons From 1973

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Mark Twain reputedly said that history does not repeat itself but often rhymes. And indeed the Ukraine war seems to echo the 1973 Yom Kippur war in its dire energy consequences. The 1973-74 oil embargo and skyrocketing prices caused most OECD governments to decide on drastic measures and implement them quickly without significant backlash. Many of those policies set half a century ago have also mostly survived regardless of how oil prices have evolved. Today, while short-term options are readily available to substitute Russian energy imports, the crisis could similarly trigger decisive longer-term policies and trends that expedite the world's low-carbon transition.

It took Western Europe about 15 years to halve its oil consumption per dollar of GDP (in constant money), which is now 70%-75% lower than in 1973. This is the kind of effort the world would need to make again in the next 10-20 years in terms of carbon emissions if it wants to achieve the Paris Agreement's 1.5°C target.

The oil embargo and high prices caused OECD countries to deploy savings plans unheard of in times of peace. Some measures were short-lived, such as gasoline rationing in many countries, the introduction in the Netherlands, Belgium and Switzerland of car-free Sundays, or the requirement in France for offices to switch off lights after 10 p.m. and TV stations to stop broadcasting after 11 p.m. The UK, which was also facing a coal miners' strike, introduced a three-day week, under which commercial use of electricity was limited to three consecutive days each week to reduce power consumption.

Similarly, in the case of a potential Russian energy embargo in today's context, quick policy measures would minimize costs for Europe because gas demand is seasonal, a group of German economists argue in a new report on the economic impact of stopping Germany's Russian energy imports. An early move would allow "Norwegian and other sources" to take over more easily during the summer months while keeping European industrial production going. It would also "immediately trigger the substitution and reallocation dynamics that are central to reducing economic costs." Those would amount to around 2.5% of GDP or €1,000 ($1,100) per German citizen over one year, which is significant but bearable, and substantially lower than Germany's 4.5% GDP decline in 2020 during the peak of the Covid-19 pandemic.

Substituting Russian imports of oil and coal would "likely not pose a major problem," the report's authors note. Likewise, gas that is currently used for power generation could easily be saved by switching to coal — and possibly nuclear — and reallocated to other users. Those would have to save or substitute energy — or, for industrial companies, to reduce production but this would be limited, the report finds.

Beyond immediate emergency measures, many policies launched during the 1973 crisis have either already had a marked long-term impact or they provide useful models for decision-makers to follow and repeat. Road speed limits were introduced in many places in response to the crisis five decades ago, which are still in place or have been intensified. In the Netherlands, for example, the daytime motorway speed limit was recently lowered from 130 kilometers per hour to 100 km/h to reduce CO2 emissions.

Energy Conservation Measures

Similarly, energy conservation was promoted throughout OECD countries, for example with the US' Corporate Average Fuel Economy standards for new cars, which were enacted in 1975 and are still in place. In fact, the US government was already considering energy efficiency policies before the 1973 crisis as it was concerned about rising oil imports from the Mideast. While demand was growing by around 4.5% per year and showing no sign of slowing down, US oil production had peaked in 1970 and was starting to decrease.

In France, people were encouraged to reduce heating temperatures to 20°C. This was turned into law in 1974 for public housing, schools, offices and commercial buildings, and later tightened even further to 19°C. Today, a strict EU-wide enforcement of that temperature — down from the current 22°C average — could save the EU 20% of its Russian gas consumption at almost no cost, according to International Energy Agency (IEA) data.

The 1973 oil crisis also led to greater interest in alternative energy sources, including gas, coal and nuclear. Gas consumption, which started to grow in the UK and Germany during the late 1960s, accelerated further during the 1970s. In the US, where gas production had plateaued, the oil crisis' main winner was coal, a domestic commodity. US coal demand grew by an average 2.3% per year over the 20 years following the crisis, versus only 0.9% per year for total energy and no growth for oil and gas.

But the most remarkable change, which is often cited as a model for global renewable deployment to follow, is the French nuclear program. France had launched an ambitious plan in the late 1960s to address its lack of fossil fuel resources, which was targeting 13 gigawatts of new capacity to be commissioned over 1972-77. The oil crisis caused a dramatic inflation of ambitions, with an additional 50 GW to be developed over 1974-80 and a long-term target of around 150 GW by 2000.

This was revised in the mid-1980s as low economic growth and better energy efficiency made it clear power demand was not growing as fast as expected. But France managed to commission 63 GW of nuclear capacity over 1978-99, or an impressive 3 GW per year over 21 years. The share of nuclear in French electricity production reached 75% in 1990, up from just 8% in 1973.

Net-Zero Goals

The IEA's net-zero scenario similarly assumes that wind and solar energy should reach 70% of global power generation by 2050, up from just under 10% now. To achieve that goal, new capacity would need to grow twice as fast over the next three decades as in the past few years. As unrealistic as it may look, French nuclear construction during the 1970s, 1980s and 1990s shows that such a spectacular and lasting effort is possible. Enel Green Power's boss Salvatore Bernabei concurs. History shows that "we constantly underestimate whatever happens in terms of renewable capacity growth and cost decline," he said recently. Current solar energy forecasts to 2030 are over 30 times higher than in 2010, and cost projections three times lower, he emphasized.

Philippe Roos is a senior reporter at Energy Intelligence based in Strasbourg, France. A version of this article appeared initially in EI New Energy.

Topics:
Low-Carbon Policy, Military Conflict, Oil Demand, Renewable Electricity
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