Oil Crises Change Our Energy Outlook – This article contains a series of articles on A History of Fossil Fuel Dominance. Therefore, to understand the whole series of these stories, you should read the previous articles. We have compiled the previous articles to the last article on the following list;
Oil Crises Change Our Energy Outlook
In the twentieth century, the large international oil companies from the United States and Western Europe (Shell, BP, etc.) —often referred to as the Seven Sisters— carved up most of the world’s oil supply. Thanks to lucrative contracts made with leaders in oil-rich countries, crude oil was exported dirt cheap, for just a few dollars per barrel, with massive one-way benefits to consuming countries such as the United States, Germany, France, and the UK.
That all changed in the 1970s in the wake of a heated conflict launched by Egypt and Syria against Israel. Both wanted to recapture territories lost in the 1967 third Arab-Israeli war. To the surprise of many, Egypt decided to amass an invading army with Soviet support along the Suez Canal on the south and Syria on the north along the Golan Heights. It was a failure; Israel’s stronger army pushed the forces back in a matter of days. A key part of the success was secret US support in supplying hundreds of tanks, artillery, and ammunition supplies via an airlift operation through Portugal code-named ‘Nickel Grass.’ In response to the US support, the Arab countries launched an oil embargo in the autumn of 1973, and halted all oil exports to Canada, Japan, the Netherlands, the UK, and the US. It was the start of the first oil crisis, which sent oil prices to about $60 per barrel (in 2014 dollars).
This oil crisis had such a substantial effect because US oil production had peaked in 1970, and the country could no longer increase its production levels. Earlier, in response to the 1967 Arab-Israeli war and US involvement, the Arab countries had tried an oil embargo and reducing oil supplies, but at that time the effect was negligible on world oil markets. Now, with real restrictions on available oil, rationing of gasoline became commonplace in the US until the embargo’s end in March 1974, after the last of Israel’s troops were withdrawn from west of the Suez Canal back to the 1967 Israeli borders, combined with intensive US diplomacy efforts.
Even though the embargo was lifted, the oil price barely dropped, as US production continued to decline while demand pressure continued. Not too long after this episode, the world experienced another oil shock, because of turmoil in Iran. The increasingly unpopular US- and UK-backed repressive monarchy of Shah Reza Pahlavi was overthrown in 1979 by a popular uprising inspired by a religious cleric who had been in exile since 1964, Ayatollah Khomeini. The steep reduction in Iranian oil output from 6 to 1.5 million barrels per day, as foreign workers fled the country, brought about an oil price spike towards $120 per barrel (in 2014 dollars), which dropped in the course of the 1980s.
The pressure of oil prices on economies and concerns over future security of supply in the 1970s-1980s led to drastically new energy policies, which have formed the basis for the clean energy revolution today. Budgets for clean energy sources were raised to $20 billion per year globally, and new technology avenues explored. While nuclear power received the majority of funding, a wide range of other sources also received a f inancial research injection, including solar panels, oil from algae, tar sands and shale oil, wind power, biofuels, and ocean thermal energy.
The research funding stream of the 1980s kick-started a lot of energy start-ups that worked on the continued development of solar panels and wind turbines. And while a lot of research money stopped after oil prices declined in the mid-1980s, Japan and the US pressed on with government spending on energy research. Also a number of corporations had seen the light, such as Vestas and Siemens, and they continued large research programs into clean energy. This proved fundamental for the continued development of solar panels and wind turbines.
Later on, in the course of the 1990s and 2000s, such programs received new impetus as a result of concerns about the impact on health of coal emissions and climate change caused largely by the incineration of fossil fuels.
In the past 30 years, the latest steps of innovation have led to modern silicon-based solar panels with 20% efficiency, steel tower wind turbines that operate in all wind conditions at 120 meters above the ground or higher, and all-electric cars with 300+ kilometer ranges.
The world is seeing a growing share of new renewables, with renewable sources in 2015 providing 26% of electricity supply. The transformation that is underway is driven by a renewables-based vision of the energy future started in Germany in the 1980s, the so-called ‘Energiewende’, and has been overtaken by China and the United States in this decade. All these revolutionary changes in the world of energy have brought us into a total new era. The Tesla Revolution has begun.