The 1973 energy crisis sparked the idea for the IEA. What have we learned since then?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Victoria Masterson, Senior Writer, Formative Content

• Today’s energy crisis is far from the world’s first – an oil embargo in 1973 led to fuel rationing and a global recession.
• That resulted in the creation of the International Energy Agency (IEA), with member countries agreeing to take collective action to respond to potential supply disruptions.
• The kind of solutions needed then are still relevant today, and the IEA has now unveiled a plan to try and cut the EU’s need for Russian gas.

What is the IEA?

The International Energy Agency (IEA) is an organization that brings together governments around the world to try and ensure secure and sustainable energy supplies.

Based in Paris, the IEA has 31 member countries, including Germany, Japan, Canada, Norway, New Zealand, the United Kingdom and the United States.

The agency also has a number of “association countries”, including Brazil, China, India, Indonesia and Morocco. This status was introduced in 2015 to reflect the rising role of economies outside the OECD in global energy markets.

The IEA helps countries around the world shape policies that will make energy more reliable and affordable. Its work includes providing data and analysis, promoting energy efficiency, developing international collaborations and supporting energy technologies.

Why was it founded?

The IEA was formed in November 1974 to help safeguard global oil supplies, after the world’s biggest producers imposed an oil embargo.

This temporarily stopped oil shipments from the Middle East to the United States, the Netherlands, Portugal, South Africa and Zimbabwe (known as Rhodesia at the time).

Securing energy supplies and co-operating on energy policy were the IEA’s main aims initially. This included agreeing on actions that countries could take collectively to respond to potential oil supply disruptions.

What was the 1970s energy crisis?

The first oil crisis in 1973 caused a spike in crude oil prices that led to a global recession. Gross domestic product – the total value of products and services produced in a country – fell by 7% in Japan, 4.7% in the US and 2.5% in Europe.

Fuel rationing came into force in some countries because of shortages. The US cut speed limits to lower fuel consumption, and in France, offices had to switch off their lights after 22.00. In the United Kingdom, where there was also a strike by coal miners, the government cut the working week to three days to reduce electricity consumption.

The price of oil jumped almost fourfold between October 1973 and January 1974, from $2.90 to $11.65 a barrel.

The oil crisis started after war broke out between Arab countries and Israel in October 1973. Arab oil-producing countries imposed the embargo – which ran until March 1974 – to retaliate against Western countries that supported Israel.

There was a second oil crisis in 1979. This followed the Iranian Revolution, which led to the monarch being overthrown and produced turmoil in a major oil-producing country, causing global crude production to fall by about 7%. The shortages and panic buying that followed resulted in the oil price almost doubling in a year, to nearly $40 a barrel.

Are there any lessons for today?

In the run-up to the 1973 oil crisis, industrial countries had become “increasingly dependent” on oil imports from a region known for its “political fragility”, the IEA says.

Those same industrial countries had been “wasteful and inefficient” in their energy use and had “woefully underdeveloped” measures to conserve energy. They had also failed to properly explore alternative energy sources to oil, or develop their own production.

In some ways, you might argue that little has changed.

“Today, the imperative to act quickly on energy efficiency has never been stronger,” the IEA says. This includes reducing Europe’s reliance on imported natural gas from Russia, which the agency says has been thrown into “sharp relief” by the war on Ukraine.

Energy demand needs to be reduced quickly, and speeding up investment in clean and efficient technologies is key to this. Encouraging changes in consumer behaviour – such as turning down thermostats – could also make a difference quickly.

The IEA’s 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas says a 1°C reduction in thermostat levels could deliver immediate energy savings equivalent to Austria’s annual gas demand.

“These are actions of relevance to countries and citizens around the world,” it adds.