Energy Lessons for Europe and the U.S. from the 1973 Arab Oil Embargo

Across eastern and central Europe, anger is rising over the cutoff of Russian natural gas due to the dispute between Russia and Ukraine. While feeling angry is justified in such a crisis, the governments in this region would be best advised not to get mad at Russia but to get more secure in energy supplies and smarter in energy usage. They and the Obama administration could learn valuable lessons from how the United States responded to the 1973 Arab Oil Embargo.

On October 16, 1973, the Arab countries of OPEC embargoed oil supplies to the United States in retaliation for Washington's decision to aid Israel during the Yom Kippur War. U.S. oil use prior to the embargo had been increasing and was projected to continue increasing with no end in sight. When the embargo struck, the United States produced 17 percent of its electricity with oil. About 31 percent of U.S. homes used oil for heating. Gas-guzzling cars and light trucks averaged a paltry 14.5 miles per gallon. Even though the United States had notice of an impending oil price increase, the embargo forced action.

The U.S. government and consumers responded to the energy crisis on multiple fronts, including: forming a strategic petroleum reserve, replacing oil-based electricity with coal, natural gas, and nuclear energy, substituting oil-based heating with electricity and natural gas, and increasing energy efficiency in vehicles and appliances. By the mid-1990s, more than two decades after taking these steps, the United States used oil for only two percent of its electricity, cut home heating oil usage in half, and almost doubled vehicle fuel efficiency standards.

But the United States can and must do better in the future. Cheap gasoline prices throughout most of the 1990s until the last few years abetted many Americans' desires for fuel gulping SUVs. And with the recent drop in gasoline prices, the concern is that sufficient numbers of Americans may not get on board with buying more fuel efficient vehicles. Europeans have generally embraced greater fuel efficiency mainly because their governments have levied high enough gasoline taxes that encourage conservation. The United States should learn from this European practice.

U.S. oil reserves are also in a danger zone. While the U.S. Strategic Petroleum Reserve had maxed out in 1985 at 118 days of protection, if imports are shut off, increasing U.S. demand for imported oil has reduced the reserve's ability to buffer supply shocks. Today, this reserve only provides 58 days of protection, but the International Energy Agency advises 90 days of reserve.

Although many eastern European countries have invested in strategic gas reserves, several of them, like the United States, fall short in having adequate capacity. For instance, Croatia only has three weeks of reserve and depends on Russia for 37 percent of its gas. While Bulgaria has a larger reserve of two months, it depends far more heavily on Russia to provide 96 percent of its gas.

Bulgaria's gas shortage has spurred Sofia to express interest in restarting a Soviet-era nuclear reactor. To be admitted into the EU, Bulgaria, Lithuania, and Slovakia were required to shut down some Soviet-designed nuclear power plants that had not met Western safety standards. On January 12, Slovakian Prime Minister Robert Fico said that he would order the restart of a reactor--only two weeks after it was closed--if gas flows are not resumed soon. And a nonbinding referendum last fall in Lithuania showed overwhelming--nine-to-one--support for keeping open the Ignalina reactor, which is a more advanced version of the Chernobyl reactor that experienced a devastating accident in 1986. Lithuania has committed to shut down the last Ignalina reactor in December.

Bulgaria, Lithuania, and Slovakia should abide by their decisions to close these older generation reactors. The lesson learned from the U.S. experience is that safety should not be sacrificed for energy security. The 1979 Three Mile Island reactor accident taught that the U.S. needed to take a much more proactive stance on nuclear safety. Largely through enhanced safety and better operational practices, the United States has increased the proportional use of nuclear-generated electricity from 9 percent in 1975 to 19 percent today even though no new reactors have been ordered in more than 30 years.

Several central and eastern European countries are planning new reactors and should build those that meet the highest safety standards. But it will take at least until 2020 for these reactors to generate electricity due to the long time for construction and the increased global demand for parts and people to build the reactors.

If these countries cannot rely on more nuclear plants for more than ten years, they will likely burn more coal. But without carbon dioxide capture and storage technology, these coal plants will run afoul of EU restrictions on reducing greenhouse gas emissions. While no large-scale commercial coal power plant is using this technology, the current crisis presents an opportunity for the EU to provide financial and technological assistance to these countries to develop and deploy this type of coal plant. Like nuclear plants, these advanced coal plants will take many years to build.

Countries in this region can further reduce Russian gas dependence through conservation and energy efficiencies. These offer the greatest payback in the near term. Another longer term measure is to make far greater use of renewable sources such as geothermal (which is abundant in many parts of eastern Europe), wind, and solar energies.

There is no immediate fix. Eastern and central European countries, however, have considerable leverage in placing themselves on a more secure energy footing. But they will need more than a decade to significantly reduce their growing dependencies on Russian gas. The time for Europe and the United States to act is now.

Charles D. Ferguson is the Philip D. Reed Senior Fellow for Science and Technology at the Council on Foreign Relations. He is writing a book on energy policy and government decision making.

Comments

[Saildog]

The assumption lying behind this article is that energy, is geologically available, but politics is hampering access.

Russia is having a severe winter and if production is down; and domestic demand is up may meean they do not have enough to export. Ukraine may just be a large smoke screen to divert attention away from Gazprom production problems.

Similarly oil production has peaked. The current low price has ensured investment in new production has slowed dramatically ensuring that there is no chance of meeting the annual 5mbpd (5 million barrels per day) production decline from existing fields.

The laws of thermodynamics mean no combination of ethanol, hydrogen, used french fry oil or anything else will replace oil. The US is absolutely exposed to oil insecurity and there is nothing it can do about it.

The best option by far is to use less. Shared rides, less flying, smaller cars, fewer non-essential trips, more bicycles, live closer to work, buying local produce, more walking, are some of the answers (no silver bullets). The answer is to shift the burden of taxation from labor to energy. Using less oil will give us time to develop alternatives, maybe, if we are lucky. But we need the time.

Citizens not paying payroll taxes mean they have enough money to pay for their more expensive energy needs. More importantly they will have the choice about where to spend their own money. They will make rational choices. Alternative energies will also have room to grow.

[BBackSoon]

I agree that the US should start weaning us off of oil and the idea of imposing increased taxes on Gasoline sound like a good way to go but I don’t think we are ready. The author mentioned that Europe has high taxes on gas and diesel and this forces them to conserve but they also have an efficient and extensive rail network that is much more efficient at moving both people and goods. In the states if you want to travel from major city to major city cheaply you have 3 choices, Personal Car, Bus and Train. I have not taken a train lately and have never taken a cross country bus trip but I understand that they are not the nicest forms of transportation, read that as downright unpleasant.

Until we have a efficient way of moving people and goods around this country that is more attractive than personal car, we cannot impose heavy taxes.

[JimBozo]

Maybe if you tried some of those alternate forms of travel, you'd be better qualified to express your expertise. Train travel is much more relaxing and comfortable than airline travel, and at least on the eastern corridor, bus travel is at least as comfortable as flying coach class. Slower, yes, but there are no chickens and cook fires going on in the aisles of a modern bus, and the cabins are plusher, if anything. Travel at the wheel of a personal car, surrounded by other idiots in theirs, is comparatively dangerous and nerve-wracking- probably the least pleasant form of transportation there is.

[vanzandtj]

If those Soviet-designed nuclear power plants had met Western safety standards, why did the EU want them shut down? Is there a "not" missing from the sentence?