The Fuel Crisis and the Three-Day Week
The UK is in the midst of an energy crisis, with surging gas prices causing multiple suppliers to collapse and petrol forecourts running empty amid panic buying. It is a crisis that invites a comparison to an earlier shock.
In October 1973, as war erupted between Egypt, Syria and Israel, Arab oil producers declared an embargo against Israel’s western allies. The consequences of this embargo were sudden and severe. The price of oil more than quadrupled.
In the UK this oil squeeze quickly escalated. In a dispute over pay, the National Union of Mineworkers implemented an overtime ban in November before miners voted for a full strike in January. It was the overtime ban, which had a significant impact on production, that pushed the Heath government to declare a state of emergency. The now infamous three-day week was adopted in a desperate attempt to preserve energy supplies.
At the time oil and coal accounted for the vast majority of the UK’s energy supply, with gas and nuclear power making smaller contributions. But the balance had shifted significantly from the beginning of the previous decade, when coal accounted for 75% of the energy mix, to oil being the biggest source of power. North Sea exploration had begun in the 1960s but had not yet produced commercial supplies. In little over a decade the UK went from meeting the vast majority of its energy needs from a fuel buried under our feet, to being dependent on imports from a regional bloc willing to turn off the taps as a political weapon.
Unsurprisingly, an immediate impact of the oil crisis was for western nations to hasten their efforts to identify alternative supplies. Such a set of circumstances had been predicted. The Trade and Industry Secretary Peter Walker told the House of Commons that “faced with the likely prospect of an oil crisis in the Middle East” the government had a year previously begun “to pursue the only sensible energy policy available to the country, which was swiftly to increase the supply of energy from every available indigenous source.” North Sea oil was to be developed as quickly as possible and nuclear power expected to play a major role.
But such a transition would take time. A more despondent response was to see energy as a cost that should be reduced permanently. The European Community agreed a plan to slow the growth of energy consumption, with a particular focus on oil, while an internal Downing Street report declared that the oil crisis had ended the era of “cheap energy for ever” and recommended taxes or bans on some household appliances.
As it happened the extraordinary rise in oil prices was a massive boost to the commercial viability of European oil production. The North Sea is a technologically challenging place to extract oil. Consequently the costs per unit faced by North Sea producers were significantly higher than for the existing exporters in the Middle East. But the oil crisis dramatically altered these calculations, and the UK government was by 1974 warning that multinational oil firms would reap such “enormous and uncovenanted profits” from their North Sea licences that the wealth flowing out of the UK would be “intolerable”.
The simultaneous pressures on supply of coal and oil quickly led to the end of the Conservative government. In the midst of the three-day week and the miners’ strike, Edward Heath called an early election which saw Labour come to power as a minority government. The attempt to gain a political mandate to face down the NUM failed. Harold Wilson, the newly elected Prime Minister, swiftly agreed a pay deal with the miners and the three-day week ended.
For Heath’s replacement as Conservative leader, there was an important lesson to be learned from this crisis. While reliance on foreign imports had harsh economic consequences it was the reliance on a heavily unionised workforce that had ultimately brought down the government of which Margaret Thatcher was a minister. A decade later she was determined to exact her revenge.
Today China faces its own energy crisis. Several regions have faced widespread power cuts due, in part, to a lack of coal. This comes as China, keen to signal its green credentials, has pledged to stop investment in coal outside of its borders.
China’s current struggles are one factor driving up global demand for, and so the cost of, gas. This is a fresh reminder of the lesson learned in the 1970s – that reliance on imported fuel leaves a country vulnerable to external shocks. And as in the 70s, the UK government has signalled that it sees an expansion of nuclear power, and a continuation of North Sea exploration, as key solutions.
In the debate over the Cambo oilfield, supporters of the industry cite the importance of continued domestic production while the country transitions away from fossil fuels. Inevitably, the same arguments will be made by those who wish to prolong China’s coal mining, and in every other country with domestic fossil fuel supplies. If oil is not drilled in Scottish waters, the argument goes, we will be forced to import from elsewhere.
In the 1970s, the expectations within Downing Street that the government would need to ban electric toothbrushes and hedge clippers never came to pass. The era of cheap energy was not over – new sources were found, and supply and demand grew in tandem. The initial instinct to stem our dependence on fossil fuels was forgotten.
Hansard – Fuel and Electricity Control Bill debate, 26 November 1973
National Archives – North Sea Oil Policy, 1 July 1974
Oil crisis and a veto on the Queen, The Guardian 1 Jan 2004
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