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19.1.  The importance of energy for Europe

  1. The 1973 energy crisis
  2. International energy cooperation
  3. European energy strategy

Energy policy is important because energy is at the core of economic and social activity in industrialised countries. Energy costs affect not only industries with large energy consumption but also industry as a whole and even the cost of living of citizens, notably because of the impact of energy prices on transport cost and heating. While respecting the subsidiarity principle and the environmental requirements for sustainable development, European energy policy aims, therefore, at influencing energy production and consumption with the objective of securing economic growth and safeguarding the wellbeing of the citizens of the Union. It must, on the one hand, ensure the smooth functioning of the single market in energy products and services and, on the other, guarantee the supply of relatively cheap and secure (from the strategic and environmental viewpoints) energy resources to the States of the Union. The common energy policy thus revolves around two axes: the functioning of the internal energy market and the security of energy supplies.

The common energy policy was not forgotten by the "founding fathers", who devoted two Community Treaties to this sector: the ECSC Treaty, which deals with coal and Euratom, which covers nuclear energy [see section 2.1]. They failed, however, to give the institutions of the European Economic Community any clear responsibility for the hydrocarbons sector. Although with hindsight this may be questioned, in the 1950s coal was in abundant supply, was relatively inexpensive and met 65% of the energy requirements of the six founding countries. It was therefore seen as the energy, which would fuel the creation of the common market. Furthermore, impressed by the recent demonstration at Hiroshima of the force of atomic energy, experts were predicting a bright future for its peaceful use.

No clear need for a common or even national oil policy was perceived in the years when oil was cheap and supply certain, which was the case throughout the post-war years up to the early 1970s. This golden era was anchored in major oil discoveries by Western oil companies in the Middle East and Africa and in the legal system governing the exploitation of oil reserves. The central principle of this system was the granting of a prospecting and working monopoly over a given area by the producer country to one or several foreign companies (licence). The activity spectrum of these companies covered all of the petroleum industry activities (prospecting, production, transport, refining, storage and distribution) and they enjoyed a strong position enabling them, in the vast majority of exporting countries and in relation to most of the importing countries, to regulate petroleum output and marketing terms.

Although the Governments of the then six Member States showed a clear tendency towards an "every man for himself" policy, they nevertheless approved a "Protocol of Agreement on Energy Problems" in April 1964. In this Protocol, they stated their commitment to the development and implementation of a Community energy policy, without considering it necessary to set a time limit for its definition. Time was however running against them, for world oil demand grew more rapidly than supply and around 1970 the market changed from a buyer's to a seller's one. Oil-producing countries became aware of the power which they wielded and changed their attitude towards consumer countries and oil companies. The calm which had reigned in the oil sector during most of the post-war period was suddenly shattered in 1970 and replaced by an incessant stream of demands by producing countries, by agreements concluded and broken and finally by a mad rush for self-survival among consumer countries.

Very few specific measures were adopted in the oil sector until the crisis hit this sector. Among the rare few was one on the obligation of the Member States to maintain minimum stocks of petroleum products as a security measure [Decision 68/416, repealed by Directive 2009/119, see section 19.3.4] and one on the notifying of the Commission of investment projects of interest to the Community in the petroleum, natural gas and electricity sectors [Regulation 1056/72 replaced by Regulation 256/2014, see section 19.2]. Special mention must be made of a Directive adopted by the Council in July 1973, just a few months before the October 1973 crisis, urging the Member States to take measures, appoint bodies and prepare intervention plans to mitigate the effects of possible supply restrictions [Directive 73/238, replaced by Directive 2009/119, see section 19.3.4].

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Your roadmap in the maze of the European Union.

Based on the book of Nicholas Moussis:
Access to European Union law, economics, policies

Translated into 14 languages

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