OPEC Embargo +40: What Have We Learned?

This week marks the 40th anniversary of the OPEC oil embargo. On October 16th, 1973, the Organization of Petroleum Exporting Countries initiated activity which ultimately raised the price of oil by 70%. Production curtailments were set in motion, and an embargo was imposed. Oil prices quickly quadrupled. This wasn't the first or last time that major shifts in energy prices would dominate the world news. What is most enlightening, though, is how countries have learned to enhance their energy resilience.

In the years immediately following the first oil shock, industrialized, oil importing nations banded together to form the International Energy Agency and stockpile strategic petroleum reserves. National energy ministries were established, and energy security became a matter of greater concern. The structure of energy trading also changed as long-term contracts gave way to a more complex array of options, supported by spot markets.

Energy diversification also occurred in other ways. In Brazil, the Pró-Álcool program enabled a rapid shift to sugarcane-based ethanol as a transport fuel. Agricultural research, development and production were fine-tuned to enhance the yield of sugarcane crops.  Between 1975 and 1985 alone, Brazil's automotive fuel mix shifted from negligible amounts of ethanol to 41% ethanol.  Flex fuel vehicles also found a market as fuel tank sensors automatically adjusted to any combination of fuel (including 100% ethanol). By 2012, 88% of licensed passenger and light commercial vehicles in Brazil boasted flex fuel design.

France, Denmark, and Iceland similarly shifted in ways which improved their self-sufficiency. With contributions from multiple sectors of their economies, they became regional, and, in some cases, international leaders in their selected energy technologies. France developed its nuclear generation capabilities. Denmark shifted to wind production, and Iceland scaled its geothermal energy. With Iceland and France, the markets, expertise, and technology were to some extent in place, enabling sizable energy switching by 1985. In other countries, like Denmark, fuel substitution took longer as a newer technology base was developed.

Perhaps not surprisingly, today's energy discussions about security, jobs, and sustainability often become entangled over questions about timetables, costs, and feasibility. If we're not careful, debates can also wage on incessantly over whether certain technologies should be favored, and whether national strategies centering on self-sufficiency and resilience are worth the effort. Ultimately, there are points in the road when choices need to be made. For those who are undecided, one need only look to the oil shocks of the 1970s.

If countries have learned anything, it is that they can protect themselves and become more resilient if they adopt policies and programs that increase their energy self-sufficiency. It turns out that this can be done much more quickly than anyone thought, if they build on what they have.