Oil Shocks of the 1970s

Only the oil shocks of the 1970s convinced EEC member states that it was necessary to consider a more comprehensive attitude to the energy industry and to adopt a common approach to supplies of some strategic raw materials.  As a matter of fact, the Organization of Petrol Exporting Countries (OPEC) was founded in the 1960s, its principal purpose being to coordinate oil export policies and, above all, the price of oil. Until that time, so-called indicative prices of oil had been determined by foreign oil companies (British, Dutch and American) that had agreements signed with the oil-producing countries, under which they had to pay taxes and mining concession fees. 

In the early 1970s, the position of OPEC as the principal creator of oil prices grew stronger as a result of a step-by-step nationalization of the oil industry by its member states, which took place between 1970 and 1973. OPEC’s stronger influence was also attributable to the growth of the global economy, resulting in a higher demand for oil, which had gradually been replacing coal as the world’s primary energy source. On October 6^th, 1973, the Yom Kippur Day (the most important Jewish holiday), Egypt and Syria launched an attack against Israel. As a result of the conflict, Arab countries reduced oil exports by some 50 percent. The event is known as the first oil crisis (first oil shock). Although primarily aimed against the United States as Israel’s ally, the reduction affected all countries without any exception. For example, oil (80 percent of which was imported) accounted for almost two thirds of the energy consumption of the European Communities. Within just four months, the price of oil increased by 300 percent, from USD 3 to USD 12 per barrel. Europe responded to the situation by convening a summit of the Council of Europe in Copenhagen (December 14^th and 15^th, 1973), but the member states were unable to reach an agreement as to how the supply of oil should be secured and maintained.

After the second oil shock, which occurred in 1979 as a result of the Iranian revolution, the Dublin summit of the Council of Europe in November 1979 decided it was more than necessary to consider an effective energy policy. There were subsequent proposals (but unsuccessful) to create a common energy market, i.e. to include the energy sector in Europe’s internal market being built at that time.