The Iran energy shock is causing old wags to reminisce.
In 1973, the maximum permitted motorway speed in Britain was cut to 50mph (80kph), TV stations shut down at 10.30pm, factories were subjected to time restrictions as to when they could use electricity, then from January 1, 1974, the whole country was put on to a three-day week.
In the US, they are remembering how President Richard Nixon called for Americans to dim their lights, not drive so fast and switch off their heating. Other countries, too, are urgently looking back.
In India, where increased fuel prices are causing business uncertainty and an inability in cities to cook food, memories of previous shortages are vivid. On Tuesday, Madagascar declared a nationwide state of energy emergency for 15 days due to the fallout on its supply lines.
Investors as well are searching for answers. Reminding themselves, or in younger heads learning, the lessons of the past.
The truth is that while each energy crisis is different, the ripple effects tend to be familiar: higher costs, inflation, raised interest rates and contagion across sectors and industries. That last accounted for the secondary banking crisis in the early 1970s; this time, while the banks are well protected, attention is focusing on the private-credit financiers and those vast loans extended to fund artificial intelligence.
They also provoked systemic changes, so fuel consumption became a thing and how efficient cars were was a key selling point. We insulated our buildings better – I remember my father suddenly installing felt in the loft and buying double-glazing, even though we’d lived in the house for years without anything being done. The possibility of solar power was a talking point, long before climate change made it a pressing issue.
As much as has been done it is not enough. A record growth in electric vehicle sales was recorded in the UK last month but the numbers are falling short overall. The segment represents 22 per cent of all car sales in the year to date, well adrift of the official target of 33 per cent for 2026.
As a result of our dependencies, the various fuel interruptions are set to provoke an instant knee-jerk response.
The Russian invasion of Ukraine in 2022 had this flavour. An immediate galvanising knock-on response across Europe. As gas charges and inflation soared, energy security dominated headlines to a degree it never did previously.
Governments turn in on themselves in such moments, they look in the mirror and see what they own, what they can do differently.
In Britain’s case 50 years ago, the great push to exploit the North Sea began in earnest. Today, thanks to the attacks on Iran and the shutting of the Strait of Hormuz, the country can still look on the fossil fuels off our shores, clamouring for the Keir Starmer government to reopen moribund fields and recommence drilling.
The focus is again on reserves. Guaranteeing future flows is one outcome; another is being able to fall back on stockpiles. The scale of the challenge has, if anything, growth globally.
What’s occurred since 1973, however, is that global oil consumption has almost doubled to more than 100 million barrels a day. No store can cope with that, not for long.
Meanwhile, the market has become more interlinked, more reliant on international prices. At the same time, products need to be refined – worries are growing about jet oil and how that plays out with air travel, that it will lead to some flights being cancelled and fares skyrocketing.
The past teaches us, too, that the ramifications will linger. Even if the Strait of Hormuz reopens fully soon, the waves from the US-Israeli onslaught will continue to be felt.
What should happen is that the world comes together to nail down a more co-operative approach to energy, realising it is something fundamental that we all require, and whole economies and the entire financial system can be brought to their knees quickly if it is denied.
Unfortunately, what experience tells us is that this is unlikely to occur. As with Europe post-Ukraine, the 1973 Middle East oil exports embargo saw the US commit to independence in energy. China is pursuing a similar path, pushing hard on renewables.
We ought to sit down and resolve policing of bottlenecks. As Dr Anwar Gargash, diplomatic adviser to President Sheikh Mohamed, has said in the past few days “the Strait of Hormuz cannot be held hostage by one country”. Several solutions have been proposed to ensure the blockade cannot hold the rest of the world to ransom.
That is an ideal scenario. One telling aspect of the current war has been the bypassing, the neutering, of the UN. Gone are the days, seemingly, when the mighty organisation would hastily assemble, when individual and collective feelings could be made known and a level of action agreed. No one is seriously contemplating the blue-helmeted policing of the Strait of Hormuz and the establishment of a demarcation zone, but perhaps they should be.
Instead, a repetition of each nation looking after its own, adopting an aggressively protective approach, unable and unwilling to see wider and further ahead, is probable. That will be a pity. Because even though we’ve had energy jolts before, each one represents a rude awakening. Yes, it’s a calamity with the potential for catastrophe but it’s also an opportunity with the possibility of real change and gain.
For once, we would do well to adopt that stance. Whether it can be achieved with the present actors in charge in some capitals is, of course, a different matter. We can but try. Because the most certain prediction of all, the surest lesson, is there will be future shocks. At present, it is Iran and the Strait of Hormuz; next, and it may not be far away, because history tells us that as well (and the energy market’s fragility means it could be very soon indeed), it will be somewhere else.
We should act together now before it is too late again; we really should.
