ENERGY AND PRICES AND INCOMES PROGRAMMES

HL Deb 07 March 1979 vol 399 cc216-66

Debate resumed.

4.37 p.m.

Lord ZUCKERMAN

My Lords, may I add my thanks to those that have already been tendered to my noble friend Lord Halsbury for having initiated this debate. May I at the same time apologise to your Lordships if I am unable to stay until the end of the debate. We began on a slightly controversial note when the noble Lord, Lord Strathcona and Mount Royal, suggested that we were not dealing with a crisis. Whether or not with a crisis, I think we all agree that what has just happened in Iran has shown how vulnerable modern industrialised societies are to any dislocations in energy supplies. I do not think that anyone will dispute that proposition.

Equally—and this has not been raised yet, and maybe I shall conclude on this note—we have not yet recognised in this debate the enormous political consequences, both national and international, which may result from this kind of dislocation. In the very short term, as the noble Earl said, one country can buffer itself against the shock waves generated by a sudden dislocation of this sort, but at great cost, and it will not last. As everybody who has spoken so far has indicated, no industrialised country today can declare for itself a Monroe Doctrine for energy, and not only for energy but even for conservation.

Yesterday some of your Lordships were present at a sub-committee of the European Communities Committee where we heard from Dr. Riccardo Perissich of Directorate-General XVII about the success or failure of conservation programmes in the Community. He indicated that even those programmes—and the measure of their success he admitted he could not possibly attest to—reflect on all the other countries in the Community. We are quite definitely all part of a world nexus of supply. Yet in spite of that of course we all have our national problems. We have different mixes of supply: coal, oil, nuclear. France, for example, has most successfully embarked on—and here I would agree with the noble Viscount, Lord Thurso, in what he said—a splendid programme for nuclear energy. We are all lagging. Each of the countries concerned has its particular problems, just as we have ours. There are problems of employment; we have our balance of payment problems and, above all, we have different investment programmes; and when we look at the problems, even though we are tied up with the rest of the world in the whole situation of supply and demand, our problems come first. But for years this problem of energy supply has been an international one and has been recognised as such. There have been successive world energy conferences. When President Carter assumed office he also accepted the results of an inquiry carried out under the auspices of the Ford Foundation—it was known as the Ford-Mitre Study—which had an enormous influence on President Carter's approach to nuclear policies, not only in the civil field but so far as defence was concerned. He wanted a no plutonium economy; we did not quite agree with him.

Other international inquiries are going on. There is a most formidable one, which has been going on for three or four years, by the International Institute for Systems Analaysis in Vienna under the control and direction of a very distinguished German named Dr. Haeffle who has contacts all over the world. I have cited only three—the World Energy Conference (there was one last year in Istanbul) the Ford-Mitre Study and the Vienna Study—and because we all have our own investment programmes, in the end we pay very little attention to the results of these international inquiries.

Despite that, we all agree certain basic propositions. We know, for example, that regardless of the views of some people who are proponents of low energy policies, the demand for energy globally is bound to go up because of increases in population, because of the need—indeed, the demand —to increase standards of living, and because of our need to maintain our own standard of living. We would also, I think, not dispute the proposition, though nobody can put a date to it, that fossil reserves are going to dry up and will be exhausted at some time; as the noble Earl pointed out in his opening speech the price of fuel will change as these things happen.

Another point which I think no one will dispute is the environmental issue.

We cannot have unconstrained access to fossil fuels—coal and oil—without affecting our environment, and that of course relates back to the whole problem of standards of living because, so far as the environment is concerned, ignorance and poverty due to low standards of living are a far greater hazard to the environment than greed.

In theory, we also agree with what I would call my fourth proposition—it was referred to by the noble Viscount, Lord Thurso—that nuclear power could solve all our problems. And even if there were a shortage of uranium ore—if the noble Lord, Lord Hinton of Bankside, were here today I am sure he would have spoken to this point—the breeder reactor would help look after us. We also heard from the noble Lord, Lord Ritchie-Calder, that one can make oil from coal. Everyone knows that is possible; there are possibilities in all these fields. We agree all these propositions, but we still cannot buffer ourselves against short-term crises such as the present one, partly because we have to deal with fears about the nuclear option.

In 1974 I had the honour of being invited to give one of the opening addresses to the World Energy Conference in Detroit. I spoke following Sheik Yamani, who opened the conference, and I was asked to address myself to the topic, "Can we have enough energy and an acceptable environment." I had forgotten this piece until I was reminded of it today, so with the permission of the House I will read a little of what I then said: Investment in new major sources of energy is held up, but if investment is held up then the environment, like every other aspect that makes for the quality of life, will be bound to suffer. In the end we shall have to rely on nuclear energy long before reserves of fossil fuels start dwindling, long before marginal inputs of energy can be gained from unconventional sources and regardless of what savings can be made by more efficient usage". I said that in 1974, and I do not think anything has changed, except that nuclear programmes have been set back even further, set back because the public is scared stiff of the word "nuclear". We know there are risks, we know there are hazards in the operation of power plants and we know there are environmental hazards. We also know—President Carter made much of this point when he began his presidency—that there are major political consequences from the availability of plutonium.

I do not intend considering how the pro and anti-nuclear lobbies and factions can be got together. There certainly are risks associated with the nuclear option; there is the question of leaks and the problem of waste disposal to which reference has been made and questions asked, But I ask noble Lords this question: is it a nulcear option or a nuclear must? There are human errors, and the newspapers have been full of them this past two or three weeks. But these errors can and will be overcome with discipline. I would remind the House that they are overcome every day in the nuclear fleet of this country, the much bigger one of the United States, the even bigger one probably of the USSR and in the nuclear boats of France. Discipline in the operation of nuclear reactors is achievable and I trust will be achieved.

If the risks of the nuclear 'must', as I think of it, are as they are painted by Friends of the Earth and other enemies, if I may call them that, of the nuclear option, would any country entrust its national security to this nuclear option in the way we are doing today? Efforts have been made by many to provide a numerical assessment of risks, but unfortunately, as we know—Lord Rothschild discovered it in the recent lecture he gave—it is very difficult to persuade those opposed to the nuclear option that they are wrong by telling them there are risks somewhere else. The point is that there are major risks on the other side; there is the denial of economic growth and there is an environmental price which will also have to be paid if, instead of proceeding with investment policies—of the kind Lord Thurso mentioned—we go in for the much bigger exploitation of coal reserves.

There is also a new risk, Dr. Harold Brown, the United States Secretary for Defence, has recently been to the Middle East and so has Mr. Schlesinger, or at any rate he has spoken about the matter. They have both indicated that it is of national and vital interest of the United States that its supplies of oil are no further dislocated, and that there are no further threats. Whether or not they used the words, they left the thought that the situation could be such that there might have to be a resort to arms.

Dr. Kissinger was lately prominently displayed in the cloumns of the Economist in two articles. In the first he dealt with the defence issue of SALT and in the second he dealt with Iran. He was taken to task afterwards by George Ball, who had looked into the matter and who criticised Dr. Kissinger for his view of what has happened. Mr. Ball asked in his letter to the Economist what Mr. Kissinger would have done.

Would he have sent the Sixth Fleet sailing up the Gulf? he asked. And Mr. Julian Amery commented on that in the current issue and said: After what has been allowed to happen in Iran, it is difficult to see what else can now protect the rest of the oil bearing gulf on which Western and Japanese industries are so dependent". I mention that because it is a new risk. A confrontation of the super-Powers would carry the risk of nuclear disasters far greater than those that are discussed in relation to nuclear power plants. This is a point which has emerged as a result of the Iran crisis, and I sincerely trust that it is a point that will be taken into account by those people who are concerned with low energy policies or who are concerned to see that nuclear power is not exploited at all.

In conclusion, I believe that the consequences of disruption in short-term supply would be far less dangerous and violent if we had an assured long-term policy, if such a thing can in fact be formulated and agreed. But how do we learn to heed the writing on the wall? The other day, before I knew that the debate was to take place, I was reminded that in 1955 PEP issued a very big report on world population and resources. It was an anonymous report, but two Members of your Lordships' House were members of the panel which was responsible for the writing. I was one of the two, but I had forgotten all about it. After referring to what would be the likely increasing demand for energy over the years, and what would be the cumulative consumption of oil and natural gas et cetera, the report went on to say: One reservation, however, must be made. In an increasingly nationalistic world the oil producing countries may prefer to keep some of their oil resources against the time when they need them themselves, rather than to exploit them immediately. It is also possible that as a result of political factors some of the Middle East's oil—and it is in this region that the bulk of the world's reserves are situated—may be lost to non-communist countries. Subject to this, oil reserves et cetera will be ample to carry us on through". Mr. Max Nicholson who was then the director, I think, of the PEP, in passing me this reminder, said: Message received in Whitehall in November 1973"— the report was issued in 1955— time elapse 18 years five weeks. Distance from Queen Anne's Gate to Whitehall 300 yards". There must have been many other groups and individuals who in 1955 saw this writing on the wall. I hope that we can realise that there will be more writing on the wall and that there will be more crises. I hope also that we buffer ourselves by having an assured long-term policy, at least in the nuclear field and, if it is economically feasible, also in such fields as the one to which the noble Lord, Lord Ritchie-Calder, referred.

Viscount THURSO

My Lords, before the noble Lord sits down, I should like to ask him whether, in my unavoidable absence to take a message, he said that I had suggested that nuclear energy would solve all our problems? I certainly did not mean to suggest that nuclear energy would solve all our problems, but merely that it was a key factor in any strategic solution that we might seek to the energy problem.

Lord ZUCKERMAN

I fully take the noble Viscount's point, my Lords. Of course nuclear energy cannot solve all our problems, but it is a buffer background to energy supplies. Prime movers will need oil. I see no way in which that proposition will ever be pushed aside, whether in agriculture, or on the roads. But then, of course, there may be other long-term options as well.

4.54 p.m.

Lord TEDDER

My Lords, it is with more than usual trepidation that I rise to speak in your Lordships' House sandwiched as I am in the list of speakers between my noble friend Lord Zuckerman and the noble Earl, Lord Lauderdale, both of whom are first eleven speakers, while I regard myself as lucky to get into the second eleven. As previous speakers have pointed out, events in Iran have shown how we need to be reminded how precarious are the supplies of oil on which so much of the Western World depends for its energy, but surely the most important lesson is not simply the precarious situation of the Western World's oil supply, but the lack of diversity in our energy supplies. Too many people in this country seem to take the attitude that we can lie back and use up our supplies of North Sea oil, and when these are finished go back to our large reserves of coal. I need hardly remind noble Lords how vulnerable are our North Sea oil supplies, or for how short a period the North Sea will provide adequate supplies of oil for our domestic needs. What is so much more important—and many noble Lords have already emphasised this—is the dependence of the whole of the Western World's economy on adequate supplies of oil, mainly from Nigeria and the Persian Gulf. We belong to the European Community, and we are also a founder member of the Western Alliance. We cannot separate our affairs from those of Western Europe and North America.

When we debated in your Lordships' House nuclear power and the environment I accepted that in the short term nuclear power must be developed, but I made a strong plea for the development of energy resources which would not affect the environment. I was then, and I remain, absolutely convinced that in the long term our descendants' primary source of energy must be what it has always been —the sun. Here I take issue with the noble Viscount, Lord Thurso, and my noble friend Lord Zuckerman. I am not saying that nuclear power should not be developed in the short term, but I am sure that in the long term the primary source must be the sun. While I accept that in certain circumstances wind and waves may be important sources ofpower, the really important source will eventually be, as it has always been, the conversion of solar electromagnetic radiation into fuels by photochemical processes.

All the fossil fuels which we currently use, from wood, to peat, to coal, and to oil itself, were formed by photochemical processes utilising sunlight to convert carbon dioxide and water in the air into complex carbon compounds. The simplest possible photochemical process is the direct decomposition of water into oxygen and hydrogen, and the subsequent use of hydrogen as a fuel. Some noble Lords may have seen the television programme on the use of hydrogen as a fuel, and this will I hope have convinced some of the doubters in the previous debate of the practicality of using hydrogen as a fuel source once one has elucidated a way of making it. In the earlier debate I discussed two ways in which solar energy can be used. The first was the direct conversion of solar radiation into either heat or electricity. The second was the use of electromagnetic radiation to promote chemical transformations which lead to fuels which can subsequently be burnt, releasing the energy stored by the chemical synthesis.

I have briefly retrod the path that I travelled in our debate on nuclear power and the environment because I wish to remind noble Lords that the key to all our energy problems is research, and of course this applies to nuclear energy just as much as to other and conventional sources. In the past this country was pre-eminent for the way in which its sons and daughters ventured out into the unknown. The now departed British Empire was by and large created not by conscious empire builders, but simply by the enterprise and initiative of British men and women as they explored the then unknown. There are no new continents to be found, few unsealed mountains are yet to be climbed, but there are endless continents and almost impenetrable mountain ranges to be discovered and to be crossed in the fields of science. The enthusiasm and initiative of British youth should be turned more and more to the exciting, but yet unpenetrated, fields of scientific research. So far what I have had to say though I believe important, has to some extent been platitudinous. My message is that in order to protect ourselves, and indeed to protect the whole Western World, we must diversify our energy supplies, and the only real way in which we can do this is by intensifying our research.

There is a EEC programme for research and development of non-nuclear sources of energy. It is an indirect programme, which means that research contracts are offered to interested laboratories on an approximately 50–50 cost basis. The four-year programme was formulated in 1974 and started in 1975. The programme comes to an end on 30th June of this year. The programme has fairly modest aims; namely, to reduce the Community's dependence on imported fuel from 60 per cent. to 50 per cent. When you remember that it was formulated in 1974, I think it shows how far-sighted some people were at that time. The total programme, costing about £35 million, includes energy conservation, the development of hydrogen as a fuel, solar energy, geothermal energy and systems analyses appropriate to the problem.

I wish to concentrate on solar energy, as it is the field about which I know most. The solar programme, costing £10 million approximately, involves about 125 to 150 laboratories in the United Kingdom and the rest of the EEC, both industrial and academic. The solar programme includes, first, habitat. I had a vague impression that that meant something to do with animals—I do not know—but what it in fact means is the heating and cooling of buildings, and it is in fact a very applied programme. It takes about 20 per cent. of the solar budget. Then there is the photovoltic programme. This is the direct conversion of solar energy into electricity. In the United Kingdom, this is mainly supported by industry; in the other EEC countries, the universities take a bigger share. It is a field in which the United States is unquestionably well ahead of Western Europe at the present time. That takes about 30 per cent. of the solar budget.

The next item is power plants. These are large focusing mirrors to heat boilers. This is, of course, not terribly suitable to this country, but the trial power station is being built in Italy. That takes about 25 per cent. of the budget. Then, photochemistry and photobiology, which is the area in which I have been interested, is just basic research at the present time; and that takes about 10 per cent. of the budget. Biomass—that is, the deliberate growing of trees and plants and the use of waste organic materials as fuel—takes 10 per cent. Finally, there is the assessment of radiation data. That is to collect the flux of the sun around the world, so that you know where to build your solar station. That takes about 5 per cent. of the budget.

All this latter work is just the solar energy section of the whole programme. As I have explained, the whole programme was for four years, and it ends on 30th June. I am given to understand that the prime reason it has not been renewed is indecision by the United Kingdom. Even if a second four-year programme were agreed to in Brussels today, no new work could be started until the beginning of 1980. Once the new four-year programme is agreed by the Commission, they still have to decide which projects to continue, which projects to stop and what new projects to start. In the meantime, the highly-skilled research teams will have been broken up, and the best men will have left to do other things. The decision to proceed or stop should have been made at least nine months before the renewal date.

Noble Lords should appreciate that the United Kingdom receives from contracts given to British firms and British research institutes probably more than it puts in. This is a measure of the high regard and esteem in which our scientists, engineers and management are held by their colleagues in Europe. I tried to get a message to the noble Lord, Lord Strabolgi, and I hope I did, but what I should like to know when he answers this debate is whether he can give us some indication as to when a decision about the second four-year programme for the research and development of non-nuclear sources of energy will be made. But, above all, I hope that everyone responsible for scientific research, noble Lords and civil servants, will realise in the future that you cannot leave the question whether to continue or not to continue a research programme until the programme has almost run out. If you do this, you will get a very poor return for your investment. My Lords, as I said at the beginning of my speech, to protect the future of our sons and daughters and to protect the fabric of our Western civilisation, we must diversify our energy supplies, and the only real way to do this is to support and intensify our research effort.

5.5 p.m.

The Earl of LAUDERDALE

My Lords, the modest appearance of the noble Lord, Lord Tedder, is also a rare one, and, perhaps because modest and rare, is all the more welcome. I am sure that other noble Lords will share my view that it is a pity we cannot lure him down from St. Andrew's more often than has in fact been the case. Whether we go "nap" on his theory about the solar solution, we would certainly agree (I, at least, would) that we must diversify and must research to that end. My Lords, the noble Earl, Lord Halsbury, among so many telling phrases, asked whether we must be cold, hungry and unemployed before we learn the truth, or words to that effect. It is commonly said of energy that the lead times are long; but the learning times are longer still. It took the Heath Government three years to set up the Department of Energy; it took the Department of Energy five years to set up a conservation division; and it took successive Governments seven or eight years before they hearkened to the pleas of this House that an Energy Commission should be established.

Again on learning, my Lords, there are still lamentably few results from the Government's endeavour to encourage conservation by the "Save It" campaign, by taxing fuel or by cutting down the speed limits on motorways. Over the past year, two more million tons of oil were used in this country—a rise of 2. per cent. That included one million extra tons of motor spirit, a rise in that sector of 5.8 per cent.; half a million more in aviation spirit, a rise of 8.2 per cent.; and a third of a million more in fuel oil, a rise of rather more than 1 per cent. My Lords, although I, too, am a squander-maniac gas-guzzler in my motor car, I must endorse the view expressed, I think a year ago, by the noble Lord, Lord Sherfield, that while a rise in petroleum tax on cars is unpleasant for motorists it is in policy terms vital; and I have heard it said by oil men on the Continent that until there is a mammoth rise, whether by tax or some other means, in the cost of motor fuel at the pump—probably to some five times what we pay at present—the motorist's insatiable desire to move will not be stilled.

The noble Lord, Lord Zuckerman, drew attention to the great risks in the Middle East, and the noble Earl, Lord Halsbury, reminded us that the apparatus of civil war is now available to troublemakers in many quarters. Surely, indeed, the so-called Islamic revolutionary upsurge is something which is unlikely to be stemmed where it now stands. Whether or not it is going to spill over into the Soviet Union, presumably no-one in this House can tell; but we see the South Yemeni pressure on North Yemen, we see the Palestinians' contamination (if I may use that phrase) of all the Gulf States, and there are already whispers of an unholy alliance between Colonel Ghadaffi and President Amin with the eventual aim of unseating Prime Minister Sadat. All these are omens of evil.

So the search for alternative energy sources without the Arab world is necessary; and what can we see, at any rate in terms of oil? There is the Canadian Arctic, where there may be some hopes. There, a sedimentary basin of 500,000 square miles may bring some comfort. There are higher hopes of Alberta; there is Venezuela; there are shale resources in the United States; and there is the Mexican situation, enigmatic and curious though it is, where for 40 years a nationalised oil company has sat on its resources and is now denying anyone else the opportunity to determine independently what those resources are.

But whether with regard to Mexico or the United Kingdom Continental Shelf, I ask this question seriously: how much longer must it be before both sides of both Houses of this Parliament insist that, in the area of issues long outlasting the lives of most of us in this House today, ideology has no more place than demonology itself? My Lords, charlatans, albeit of fanatical integrity, really do not have any place in this matter.

Baiting the multinational oil companies reminds me of Lord Lovat's cry on his way to the scaffold: "The greater the mischief, the better the sport." There is really no bonanza for these companies in the current and prospective rise in crude prices. Even a 20 per cent. rise this year will still leave the crude price lower in real terms than in 1973–74. The supposition that the companies in the North Sea are going to get enormous new and extra profits out of the rise currently envisaged is not borne out by the most intelligent calculations to which one has had access in the City. One gathers that a rise from, say, 15 dollars to 18 dollars a barrel in the North Sea would, of course, raise the present value of future cash flows of the smaller fields like Beatrice and Maureen because they have practically a nil cash flow at the present time; so they might gain in value something like 30 per cent. But the major fields like Ninian and Forties that have been in production for some while do not stand to gain more than about 12 per cent. in the present value of future cash flows from crude oil rises of the sort to which we have been addressing our minds.

So, my Lords, surely one lesson is that Britain must once again undertake a radical reappraisal of policy in regard to the Continental Shelf. There are only nine wildcat rigs operating now as against 19 this time last year. Why? Not only because the main exploration drilling under the fourth round and some under the fifth round has been accomplished; but for lack of confidence. Nobody in the private sector oil industry would gainsay that assessment. It seems there is going to be an economic slowdown, in any event which, in turn, is bound to discourage further investment not only in industry generally but in the oilfields too.

What a time, then, to be proposing, as the Government have been proposing, to renege on the 1975 Varley assurances that the PRT régime would be stable! This, when more than £14,000 million has already been invested and committed before the latest promise of a rise in PRT. It is bad enough to plague the companies that have found and developed the oil (and most are private enterprise companies) by retrospectively changing the ground rules after the licence has been issued—an activity against which many protests have been made in this House and in another place—but, surely, the Government cannot go on asking us simply to take sides against arithmetic! It is better to go back than to go badly.

Surely it is time, too, for the Government to define and publish—I repeat "define and publish"—their policy in regard to the deeper waters between 1,800 feet and 3,000 feet on the Slope. It was not clever to invite those companies that had the drill ships available to spend great sums of money drilling seven or eight deep stratigraphic holes near the Rockall basin at about £10 million per hole without the prospect of any real reward in the certainty of licences thereafter. It is time that the Government stopped huffing and puffing in regard to deep-water policy. To blow and swallow at the same time is not an easy thing to do.

The noble Lord, Lord Zuckerman drew our attention to the environmental problems raised by an extensive development of the coal industry. But I wonder whether he would claim that those difficulties apply to coal under the sea as well as to coal under the land. The fact is that we have not heard, we do not know, whether the Government have any policy whatever with regard to the coal measures already identified but not explored under the North Sea. When the National Coal Board already needs heavy subsidies, which I support, for its work on land, one must ask the question—and companies abroad are already asking the question—whether that monopoly, the Coal Board monopoly, is to be extended to the Continental Shelf; or is private enterprise to be invited to take the risks there as it has done in regard to oil, but with the confidence henceforth that the ground rules will not be changed halfway through the game?

Coal has also been referred to obliquely by the noble Viscount, Lord Thurso, and, since I agreed with so much of what he said, I wondered whether he meant to make clear the critical distinction in regard to nuclear policy between thermal reactors which use uranium indefinitely and fast reactors of the kind that he naturally hopes (and I hope) will come to Caithness soon but which will not require those enormous supplies of uranium. Unless the fast reactor is soon established on a commercial scale and unless several have been established and given 10 years to be proved, the nuclear answer will not be the answer for the year 2010 or the year 2020, for the reason that, on moderate estimates, uranium supplies in the world will run out.

Viscount THURSO

My Lords, the figures I quoted were based on a programme started with thermal reactors which would be necessary in order to build up stocks of degraded uranium and also because thermal reactors are available and proven and could be put into action now while the CFR programme was going ahead as a start with the fast reactor programme. Once this sort of combined thermal and fast reactor programme had got going and once the pipeline, so to speak, was fuelled with uranium through the thermal reactor, then, after about 1990, the fast reactor should be able to take it away without further imports of uranium. The reserves of degraded uranium so far available would, according to the figures I have, be greater than the total coal reserves at the moment.

The Earl of LAUDERDALE

My Lords, I think the House is indebted to the noble Viscount, Lord Thurso, for adding to his speech in such a way as to make his position clearer. It is a position with which I fundamentally agree. The critical thing is that unless we have the fast reactor proven and demonstrated by the mid-1990s or the end of the century and unless it has had 10 years to show that it is harmless so far as the public mind is concerned—unless that happens, a nuclear programme based simply on the thermal reactor will sooner or later run out of such uranium supplies as can reasonably be forecast.

The noble Lord, Lord Ritchie-Calder, referred to the renewed interest that there might be in extracting oil from coal. I am not sure whether he had the benefit of listening to an exchange on the Floor of this House when the noble Lord, Lord Strabolgi, gave the figures only the other day for oil from coal. He said that it comes out at about £100 a ton. The price of oil has not yet got near that price and it will be some time before it is likely to do so. But on the coal problem, if there is one lesson which comes out—and I think this chimes in with the message given us by the noble Lord, Lord Tedder, that we must diversify by research—it is that in the coal region there is an urgent need for research on means of making coal easily transportable, whether by emulsification or by other means. There is an urgent need for further research on a great scale into gasification; I refer to this both on the surface and in situ, and, arising out of that, there is need for research into the possibility of sub-sea mining by gasification or other means which one hopes will not encounter Lord Zucker-man's apprehensions on the environmental aspect.

In conclusion, may I say that none of the points that I have made is new. One only hopes that their repetition does not again recall the men who can still hear the decalogue repeated without a twinge of conscience. Within weeks of the close of a Parliament, a debate on long-lasting issues does have merit, especially when the issues will outlast the five General Elections which are to follow the next one, which itself cannot be far away. Without wishing to say too unfriendly a farewell to the noble Lord, Lord Strabolgi, who sits on the opposite Bench, whose leadership on energy questions has always been so courteous, agreeable and informative to this House, it would be a pity to miss the opportunity of saying before this Government departs that the only good Government is a bad one in a hell of a fright.

5.20 p.m.

Lord ROBBINS

My Lords, I cannot begin without expressing what has been said by others; that is, my extreme gratitude to my noble friend Lord Halsbury for having initiated this debate at very short notice, and for the stimulating way in which he opened the general horizon. The occasion of the debate is the Iranian revolution. It is not my intent on, however, to go into the political background. So far as one can see, the result which has been achieved so far has been the most peculiar combination of strict Moslems and extreme Marxists, from which it is not altogether rash to conclude that the situation is likely to change one way or another and, in any case, must be regarded as being extremely unstable.

The few remarks that I want to make this evening are entirely concerned with supply and prices, both in the short and long period. I suppose that unless things get very much worse in Iran—which is certainly not excluded—some oil will go on being produced there and some oil will probably be available for exports. I fancy that for some time it will be fractional compared to what was available before. My guess is that in the immediate future we shall witness what has actually been reported in the papers this weekend: fantastic prices being paid for such oil as is exported from that part of the world. I also conjecture that, if that continues on any scale, other oil producers may be tempted to break their existing contracts and cash in while the stocking up panic lasts.

On the whole, this is a matter which we can contemplate with a certain amount of equanimity. The period of abnormal and extraordinary bargains and prices will, if the general situation does not deteriorate, work itself out. I am reasonably sure that, whatever happens in the immediate future, the price of oil is likely to go up, and it will go up by more than was the prospect before these events occurred. In his opening remarks, the noble Earl raised the very important question: Should this cause further inflation? On that important question, I hope that there is one answer which need not promote controversy: It need not be so.

If an individual is faced with a considerable rise in the price of something which be regards as necessary for his standard of life, then his alternative is either to work harder and to make good the deficiency that way, or to economise on other things. These remarks apply not only to individuals but to communities and it is only if the Governments of this world respond to higher prices of oil by matching them with higher degrees of inflation that the vicious circle which the noble Earl described—and which is by no means excluded, politics being what they are—will take place.

The habit is for short speeches on this occasion, and I want to address my main remarks to the future of supplies of energy in general with particular regard to the almost inevitable diminution of the supplies of oil as time goes on. I think one should take that as one's assumption. Since I was a very young man I have imagined us as living on the edge of a precipice. Statistics used to be flung about in the 'twenties predicting a chronic oil shortage in the 'thirties, and so on. So far additional discoveries have seen us through. It would be absolutely criminal folly to rely on that process continuing for ever. The position which confronts us now is a position which was suggested to my mind by the very interesting debate that we had the other day on the population problem.

On the whole, speeches in that connection took what I regard as the right side. But there were authoritative voices raised arguing that one should not worry too much. I put to myself the following conjecture: Supposing we were to wake up tomorrow morning and find in our newpapers, if they still persisted, that the resources of the planet as it exists at the moment had contracted by half. We should surely be a little bit worried about that, and particularly worried about the resources that we are talking about at the moment. Sober demographers assure us that the present population of the world will have doubled by the early years of the next century, but, other things being equal, the relation between population and resources will be exactly the same as it would be if the catastrophe which suggested itself to my imagination had occurred yesterday. So I do not think we can possibly spare ourselves anxiety on this count. Either we must consume less or we must have recourse to other sources.

Coming back to the immediate oil question, which is the subject of this debate, I want to make the point that this is essentially a question for the Free World. We cannot control OPEC unless the dreadful possibility suggested by the noble Lord, Lord Zuckerman, were to take place and foolish attempts were to be made to coerce the nations which comprise that cartel. On the whole, I am inclined to think that the world is not badly served by the refusal of OPEC to increase supplies here and now to any large extent to meet the needs of the present or indeed of the next 10 years.

However, leaving that on one side, the problem for the Free World is this. If we do not act together, at any rate as regards consumption, then the activities of any one country may possibly put its balance of payments in a better position but it will make precious little impact, other than in one country which I shall be mentioning in a moment, on the world energy situation. More countries than one have to take steps of one kind or another before we can face the future with any sort of equanimity. Therefore, I welcome as a first step the decision of the IEA to restrict consumption in some way or another by 5 per cent. However, I fear that will not be enough to solve all our problems.

In connection with the further solution of our problems, I have only two points to make. The first one I want to emphasise is the good side of higher prices in this connection. Higher prices sooner or later force lower consumption, and in this particular respect there can be no doubt that the Free World situation would be enor- mously eased if the United States policy in this matter was reversed and if much higher prices were charged for oil in that important part of the world. Furthermore, higher prices not only restrict consumption of oil at the expense of other commodities but they force the substitution of near-substitutes for oil, and they stimulate thought on inventions for developing them. I have no doubt at all that in the next few years the probability is that the price of oil will rise to such a point that the further exploitation of, let us say, the Athabasca tar sands will become commercially profitable. Similarly, I imagine that the price of oil has only to rise a bit more than that for exploitation of the Colorado oil shales to become commercially profitable.

Lord SOMERS

My Lords, may I interrupt the noble Lord? I am grateful to him for giving way. Would he not agree that generally higher prices for oil would inevitably raise the cost of living in addition to raising the cost of transport, and so on?

Lord ROBBINS

My Lords, the noble Lord has anticipated the next sentiment I was going to utter; namely, that higher prices will only have this beneficial effect if, as I said earlier, they compel people to work harder and increase productivity and if Governments do not attempt to match the higher price of oil by increasing inflation.

Finally, I do not think we should be prepared to rely only on higher prices, whether they come as a result of market prices or whether—as may be desirable—they come about as a result of pretty swingeing increases in taxation. In the last analysis, as has been well emphasised by the distinguished speakers who have preceded me, we must look to the continuity of Western civilisation for developing other sources of energy. Those other sources of energy which must be sought demand further research and, before the research reaches its goal, they also demand, as has been urged by the noble Earl, Lord Lauderdale, much more immediate action than seems likely to be taken in the near future.

I agree 100 per cent. with what the noble Lord, Lord Zuckerman, said about the fundamental necessity of developing on a much larger scale the resources of atomic fission, especially in regard to fast breeders. It is no use sitting back and saying that in the long run it may be that the discovery of methods of atomic fusion will solve the problems of the world. That may happen. if it does happen, it will be a very happy event. But it certainly will not happen sufficiently soon to solve the problems which, other things being equal and if all the next period catastrophies to which some people have alluded do not occur, will certainly begin to emerge in the 'nineties. Here, I suggest, is a subject on which men of goodwill of all parties, whatever their belief in individualism or collectivism may be, can come together and urge on the Governments of the Free World more immediate action than, cynically speaking, is likely to take place.

5.41 p.m.

Lord SHERFIELD

My Lords, I, too, should like to thank the noble Earl, Lord Halsbury, for promoting this debate. He has certainly operated a very successful one-man whip on potential speakers, including, I am glad to say, one or two new recruits. I claim no special knowledge of Iran, but it seems clear that a large section of the Iranian people has reacted against a rapidly enforced change in their traditional habits and beliefs. This appears to be an example of grass-root resistance to rapid change and, in particular, to technological advance. The phenomenon is not confined to Iran. We are witnessing a similar kind of ground-swell in developed countries, and, perhaps most strikingly, resistance to technological advance in the energy field, where the opposition, manifested largely through environmental bodies, is holding up development which many informed people consider to be essential—and I am not talking only about the nuclear field—if our successors are to enjoy reasonable living standards.

The immediate consequence of the revolution in Iran has been brought out already in this debate; the interruption in supplies—the noble Earl, Lord Halsbury, put it at 10 per cent. of world oil production—and the concern that this disturbance might be followed by others in other oil-producing countries. If reasonable internal stability is re-established, it is, I suppose, probable, as the noble Lord, Lord Robbins, pointed out, that oil production in Iran will recover within a few months to something like two-thirds of its old level and will be fully restored in due course, though at what price remains to be seen. Iran will still want to develop its economy, though probably at a much slower pace, and can get the resources that it needs for this purpose only from the export of oil. It is useful, perhaps, to recall that in the Abadan crisis of 1951, when, as a result of Mossadeq's rise to power, the oil industry was nationalised, oil refining was interrupted and the expatriate staff expelled, many doubted whether refining would ever be resumed. Yet, in the event, oil production was resumed and the refinery was back in production in a surprisingly short time.

But while we may have reasonable confidence that the Iranian oil industry will recover, there will be a short-term shortage and we shall have a shock from which we should draw the necessary conclusions while we are still suffering from it. As the noble Viscount, Lord Thurso, so aptly suggested in taking his analogy from the medical world, the oil shortage arising from the Iranian situation is our mild coronary, and we should learn wisdom from the short-term inconvenience from which we are likely to suffer and adjust our regime, in the manner of a convalescent patient, to avoid much more serious trouble in the long-term.

There is, I think, general agreement between experts that global oil supplies will pass their peak in the 1990s and that thereafter they will decline. Forecasting in this field is notoriously hazardous but, as the noble Lord, Lord Hinton, pointed out in speaking in our debate on the coal industry on 23rd January—and I am very sorry that he cannot be in his place today —the best and safest guide through the minefield is the report made by the last World Energy Conference, to which the noble Lord, Lord Zuckerman, has also referred. This, as the noble Lord, Lord Hinton, said, painted a broad brush picture of the future, assuming upper and lower limits for both supply and demand of the different fuels. There are other forecasts, both much above and much below these figures, but I would follow Lord Hinton in accepting the World Energy Conference report as the basis for action since at any point within the limits it sets, what it calls for is something far more positive and specific than anything that has been attempted so far in Europe, in the United States or in this country. In the coal debate I also referred to a shorter range assessment made by the European Commission which also assumed reasonable upper and lower limits for supply and demand up to 1990 and from which similar pointers to positive action in the shorter term can be derived. Having accepted the assumptions in these documents I think we should ask ourselves what régime should now be followed to avoid disastrous trouble in the future.

A number of specific proposals have been made in this debate, and I shall not pursue any of them now but I should like to take one illustration from overseas. President Carter has just presented an Energy Bill to Congress. It provides for specific restrictions but only I think on a standby basis and that seems hardly good enough. Just before coming down to the House I picked up a paper on the energy outlook in the United States written last December by a Professor from the Massachusetts Institute of Technology. Let me quote from his summary: Even when the annual growth of US consumer needs is reduced from 5 per cent. to 2 per cent. and even when major conservation efforts reduce the delivered energy from 2 per cent. to 1 per cent. growth per year the United States requires a 70 per cent. increase in energy production by the end of the century if oil imports are eliminated. Even when the use of existing fuels is increased to the maximum extent practical there is still a requirement for a 50 per cent. increase in imported oil. The USA must reduce its end use demands. It must make major conservation efforts. It must increase its use of present fuels. But that is not enough. New technologies are needed". Then he goes on to describe what those are. He concludes with an observation so often repeated that it falls with a dull thud—"Time is not on our side".

I think there are some general conclusions which can be briefly stated and one or other of which has emerged from the speeches this afternoon. We should realise that as oil supply falls off there will be a demand that a higher proportion of our energy should be supplied as electricity and this in spite of the fact that electricity, which is a secondary source of energy, is an extravagant user of primary energy. We should realise that coal will be needed not merely to generate electricity but also for conversion into those liquid fuels which must make up for the dwindling supply of oil.

We should realise that it is improbable that additional coal supply output can keep pace with the demand which will result and that much of the electricity must be generated in nuclear stations. We should realise that it is foolishly wasteful to burn only 6 per cent. of the available uranium, as is done in thermal reactors, and that the use of fast reactors, which make it possible to use not 6 per cent. but 60 per cent. of the energy in the uranium, ought to be pushed ahead immediately—at least to the extent of building one reactor of commercial size so that a fully proved design is available by the end of the century. Here I follow the noble Earl, Lord Halsbury, in thinking that the promised inquiry into the safety and other circumstances of the fast reactor should start soon and should be related to a specific site.

Further, we should realise that the so-called soft energy alternatives are not merely expensive, as the noble Viscount, Lord Thurso, pointed out, but also that they can make only a small contribution to our energy requirements in the critical early years of the next century. Above all, we should remember—here we are again—that we are running a race against time and that one certain thing which will give us hope in that race is conservation. Energy conservation can give quick results. Restrictions may have to be imposed which are unpopular, but I suggest that only sharp restrictions can produce quick results. And it is quick results which are needed, since one unit of energy which is saved today is worth several units of energy which are saved in 10 years' time. Some savings are made quite easily and lie near at home. More than one of the witnesses at the recent meetings of your Lordships' Sub-Committee on Energy has complained of the heat in the committee room.

My Lords, I should like to make one final point. I have drawn attention before in this House to the lack of an energy policy in the European Community, despite discussions in the Council which have now been going on for about five years. We are by far the largest producer of energy in the Community, but so far we have given little or no leadership. Should we not take this opportunity of the shock administered by Iran to adopt a constructive attitude and get a move on in Europe?

5.53 p.m.

Lord WYNNE-JONES

My Lords, like all other speakers, may I thank the noble Earl, Lord Halsbury, for having introduced this debate. I hope he will forgive me if I do not go into all the ramifications of the Iranian origin of the crisis; they have already been gone into very thoroughly by several speakers. I hope that instead I may be allowed to speak about the problems which will inevitably arise. They are foreseeable problems, not just chance problems like the Iranian one. In this connection, I should like to take the side of my noble friend Lord Lauderdale who, in his inimitable way, pointed out the advantages of a non-political approach to energy problems. He always does this singularly well.

When we speak about the long term—not about what we do immediately, because that may have certain very clear political implications—it seems to me to be perfectly clear that we must have an acceptable energy policy, one which will not be overturned by every change of Government. As the noble Lord, Lord Tedder, pointed out, it is not only discouraging but absolutely inimical to any form of research if one does not know whether one is going to be allowed to continue the work which one is profitably carrying out. Therefore, I hope that we shall try to get the major political Parties to agree that they should have a policy which is acceptable, at least in its broad outlines, for a long period.

During the debate on coal which we had nearly two months ago, the Sub-Committee of your Lordships' House which put forward its report on coal pointed out that it hoped that the Government would raise the target for the production of coal at the end of this century to beyond the 170 million tons per annum which has been put into the Green Paper. Everything that has happened since then has merely shown how important it is that we should try to raise this target to an appreciably higher figure and that we should treat it not just as a target but as something which must be achieved.

When we are dealing with what happens at the end of the century, I believe that it is unwise for us to speak as though the year 2000 is a magical year and as though, if we have solved our problems by then, there will be no further problems. On the contrary; if there is to be any development in this country—and we can take this country as typical rather than as unique in the whole of the Western World—we know perfectly well that considerable demands for more energy will be made well beyond the year 2000. It is important to realise that the plans put forward in the Green Paper—good as I believe they are in general—really hold out no hope for the period beyond the year 2000.

If one looks at the figures and carries out any kind of projection which represents not a drop in consumption and production but any increase at all, one finds that inevitably the gap between the amount that we are planning for and the amount that we shall need will be increasing. The demand will not have levelled out by the year 2000.

Today I had the good fortune to meet somebody at ICI who has made a very serious survey. I was shown the whole survey. It took a period of three hours and I learned a great deal in the process. I found that after the year 2000 the demand for hydrocarbons for the chemical industry will increase enormously. I was amazed to learn that if one takes the rate at which petrochemicals are produced and used—the feedstock is drawn in and turned into petrochemicals and all the things like plastics which we have round about us—7 per cent. of our energy resources at the present time are used by the chemical industry. This percentage has been increasing steadily over the years. About 30 years ago it was only 2 per cent. If this increase continues, the projection is that 30 per cent. of our energy will be used by the chemical industry by the year 2000. They themselves say that the figure is impossible, but it shows the kind of problem with which we might be faced.

It is the kind of problem to which, in a way, my noble friend Lord Ritchie-Calder referred. We shall be faced with this enormous demand for feedstocks for the chemical industry as well as for other energy purposes just at the time when our petroleum resources are dwindling and when gas has virtually gone. We shall want to use coal. The conversion of coal into anything which is effectively usable in the chemical industry involves hydrogenation. That means that for every unit of coal there must be one unit of hydrogen. How do we get our hydrogen today? The cheapest source is from the gas methane, but by the end of the century where will be our methane? We shall have to get our hydrogen some other way. How do we get it? By electrolysis and electrolysis today is too costly to use, but it is the only way that shall be available. So it is clear that, when it comes to turning coal into anything that we want to use effectively, either as gasoline or as a feed stock in the chemical industry, we must have considerable supplies of hydrogen, which will be costly. We have to face the fact that our economy will be subjected to enormous stresses at the turn of the century, and from that point they will not decrease—they will probably increase.

The problems can be solved, of course. If one takes, for example, the making of petroleum from coal, this is already being done in South Africa. They are using a well-established process, and on top of a coal mine they have the plant for making the gasoline. According to the figures I was given today, they expect to be able to make more than one-third of their gasoline requirements in that way. It is vital for them because, with Iran refusing to supply them with petroleum, they will have to do this. Apparently, the coal never sees daylight at all. It is put straight into the processor and there they have the hydrogenation process—it is actually a Fischer-Tropsch process that they use—and the first time that the coal sees the light of day is when it is petroleum. It has been turned into a liquid as a result of this process. The process is not cheap.

It is in this way that we have to plan for the future. It is no good saying that it is too expensive or that the resources that we have to put in are too great. They are: they are enormous, but our alternative is to do without all the things that we have been accustomed to have, to deny ourselves all the development that has been going on. If we wish to do that, we can, of course, do it. There is no problem; it is quite simple. It is very cheap in money and very expensive in human life, in human pleasure, in human happiness and I should have thought that we really have only one answer. We must do this sort of thing. So we are looking forward now, stimulated by the Iranian incident, to doing all those things that we ought to do.

I agree with my noble friend Lord Zuckerman, who I think is not here at the moment, in his estimate that we should have nuclear power, that we shall need it; but I do not agree with those people who say that we should have nuclear power without paying any attention to the risks. I think that the risks still are not fully understood. I do not mean that we do not understand them in principle; of course we do, but we do not understand them in detail and in particular the disposal of waste is something which has not yet been satisfactorily solved. To me it is tragically irresponsible that the people who oppose the development of nuclear energy should also oppose the drilling of bore holes in order to try to find out how it can safely be contained. It is as though a person says, "This is too dangerous for you to do, but we will not allow you to take the safety risks that will make it safe". That is monstrous, and I think it is time that people, who for perfectly worthy reasons—and I do not blame them—are alarmed about this, do realise that at the same time they must not stop the investigation which would enable those risks to be curtailed. I believe that is the way in which we should go forward and I believe that the Government should do it as a matter of urgency. They ought to insist that these bore holes are made so that the proper containment of waste can be dealt with. There are of course many other problems, but this is not a general debate on energy: it is rather a debate on what we should be doing in consequence of what has happened in Iran.

6.5 p.m.

Viscount SIDMOUTH

My Lords, since, by the luck of the draw, I have to follow the noble Lord, Lord Wynne-Jones, today, who spoke first after my maiden speech, I should like to take the opportunity of returning the compliment, only I fear with much greater reason. The debate today, so ably introduced by the noble Earl, Lord Halsbury, has shown, as usual, the great depth of knowledge and experience available in your Lordships' House. So far as what has happened in Iran is concerned, this is obviously a clear reminder of the political factor in the energy situation to be taken into account along with the other technical considerations about which we have also heard. Whether or not its effects are long-term it is my belief that the time has already come for making major decisions about energy supply, even for the 1980s. In support of this view, my purpose is to draw attention to some of the problems which occur downstream, as it were, from the sources of energy; that is, from the point of view of the user. In doing this, I propose to refer briefly to two energy-consuming industries of which I have had experience, since in their contrasting ways they illustrate two aspects of the situation.

The glasshouse industry is made up almost exclusively of small-scale users. On the face of it, this multiplicity of small boiler plants should be readily convertible to whatever alternative fuel is ultimately established as being the most suitable. However there are many other small plants of similar type throughout the country—engineering works, and so on—which are in the same position and there would be great difficulty in effecting the change if they were all to make a move together. It would be far better to replace old plant over a period as it wears out. Unfortunately, however, the glasshouse industry has a problem, which is that a very high proportion of the total cost of its product is represented by fuel costs—30 per cent. or even more.

I believe that glass-making is one of the few other industries which has a percentage as high as that. No doubt for this reason—and in illustration of a point made by the noble Lord, Lord Robbins —glasshouse growers have had to concentrate much effort since 1973–74 on fuel saving, and only this week I saw a Ministry of Agriculture estimate that since that time the industry's fuel usage has been reduced by 24 per cent. This has been done by paying attention to detail, good housekeeping in the boilerhouse, attention to lagging, the installation of windbreaks, and so on. In bringing about this creditable result, much useful advice and encouragement has been received from Ministry advisers.

There are a few more shots left in the locker, but taking into account the pro- jected future price of fuel oil the industry might well be priced out of existence before oil supplies run out. It has in the past proved itself to be adaptable and well capable of looking after itself. Within recent years, for example, it has survived the transition from being a protected industry to one operating in the Common Market, which was already in structural surplus in most horticultural products before we joined. It has, I am glad to say, a particularly good record in the uptake of research and development, and is urgently in need now of an alternative fuel policy as soon as possible.

The transport industry presents a different picture—not so much road transport, where again there is a large number of small units amounting in total to a vast industry based on the internal combustion engine. In the road freight and passenger business the cost of fuel expressed as a percentage of working cost is not so high, at about 11 to 12 per cent., as the figure already quoted for glasshouse horticulture, but it has doubled since 1973–74. The viable alternative to the internal combustion engine does not seem yet to have emerged and road transport may well be tied to oil, or oil from coal, for many years yet.

For rail transport the time of decision must be far closer. The Railways Board has already put forward a policy document on the subject of further electrification of the system, which presumably is still under study by the Ministry of Transport. Although a good case emerges on many grounds, it does seem on present data to lack the kind of financial justification which is rightly demanded at a time of stringency. Possibly the reason is that those parts of the system for which the best case exists in isolation have already been electrified, so that the remainder make most sense only as parts of a completed whole. However, the effect on the economy of the energy situation which we have been considering today might well alter the case into one much more favourable to electrification.

When it comes to the situation, not so far ahead, when oil will have to shed some of its present energy load, then it seems to me that most of the alternative energy sources now being considered, and particularly nuclear, are geared to the generation of electricity in large static units. I should like to ask the noble Lord who is to reply whether this is a fair assessment, and, if so, whether it does not add a new dimension to the case for railway electrification. Electricity does not seem at present to have much future on the roads, and is also not a good prospect for space heating, as in glasshouses. All the more reason for gearing up rail transport, for which it is well suited, to make use of it in the foreseeable future, when it will not only have a cost advantage, at least in real terms, but also be available in increasing quantities. We are talking here of a costly scheme which will take many years, probably into the 1990s, to complete. A decisive approach to energy policy is needed to resolve it.

6.13 p.m.

Lord ENERGLYN

My Lords, I, too, would like to extend my thanks to the noble Earl for bringing this Motion before your Lordships' House for debate, especially at this time, and using such a dramatic occasion to emphasise the points that he and others have been making so eloquently over the years. Your Lordships may remember that the Persian story started on 28th May 1901 when William Knox Darcy, a Devon man who had made a fortune mining gold in Australia, signed a contract with the Shah to develop oil in Persia for 60 years. This was the foundation of one of the most famous oil companies in the world. With his normal acumen, the First Lord of the Admiralty in 1914, none other than Winston Churchill, injected £2 million of Government money into the Anglo-Persian venture. What we are witnessing today is the product of that far-sighted piece of work by Darcy and Winston Churchill.

I think it is important to remember it, as I should like to return to it towards the end of my speech, because it illustrates how often fanatical outbursts can so discolour and temporarily discredit a fundamental picture. In 1951 Mossadeq came along. He was as fanatical about nationalisation as some other people we know about. He did not last very long, because without the expertise of the British the Persian oilfields would not develop or progress, or exist even. Now we have another fanatical outburst. Are we going to see a repetition of the Mossadeq failure? I think we are. Therefore, I urge upon Her Majesty's Government not to put two big flat feet on the road along which they are trying to push the Shah at the moment. I think this is a time to hesitate, because while they may be able to use the oil that is pouring out of the wells at the moment, every oil well has a limited life.

The expertise of sinking new wells in Persia is peculiarly a product of British invention. We are too apt to forget the genius of the British in this world of oil. They have created the major advances in the discovery of oil. Originally when Darcy was developing oil in Persia he was developing the superficial oilfields. But after the war, as a consequence of the work done in Nottinghamshire, the British Petroleum Company had a set of scientists who solved two major problems, how to penetrate the flat lying cover which hides the anticlines which contain the oil and how to drill a hole absolutely vertical. They solved both these problems, and if they had not solved these the major developments of Iranian oil would not have happened.

Extrapolating that into the North Sea, had it not been for the sensible fiscal policy of this country in relation to the oil found in Nottinghamshire, we would never have been able to extrapolate the geological structures at great speed into the North Sea. The oil that was produced in Nottinghamshire was tax free and the tax was given for exploration. The noble Earl, Lord Lauderdale, has been pleading for exploration. The reason why we are not getting continuous exploration is that the money is not there to pay for it, because these academic economists who have got their fingers in the till are squeezing the profits out of the oil companies, who cannot now afford to go forward with wildcat holes to extrapolate out beyond the limits of the Continental shelves. And here we are talking about supplies of oil from Iran and other places when for all we know there is as big an oilfield lying off the west coast of Ireland as exists in the North Sea, but we have not got the money to go and find it.

Therefore, I urge this Government, or the next Government, to bring some common sense into this fiscal attitude to the exploration of oil. In other words, there is no room in the oil world for the political amateur. I would plead for the release of the shackles that are being put upon the oilmen searching for oil in the North Sea. I think I can say this, because I have been involved in finding oil, but never once did I ever persuade myself that I had the expertise to develop an oilfield. That is an entirely different expertise. I think we should in our own interests leave it to the oil men and leave politics out of it.

I would now like to turn to thermal power stations. We have solid fuel power stations, liquid fuel power stations, nuclear fuel power stations, but all they are doing really is boiling water. It is on the merits or efficiency that we think that a fast breeder reactor is better than an ordinary reactor or is better than an oil-fired boiler or a solid fuel boiler. That is what we are talking about. However, whichever type of thermal source we use, we only have to stand in any power station—nuclear or otherwise—to see the heat losses that are involved in the power station. As a round yardstick, I would say that power stations can never be more than 60 per cent. efficient. Therefore, we have this enormous heat loss with which to contend in the production of thermal energy.

However, in going too far with this concept of the future based upon nuclear energy, what is very important to remember is the strategic distribution of radioactive minerals. They are distributed in countries which can hold the world to ransom. We have seen what happened recently in Australia, and that can happen again. If one bases one's energy programme entirely upon nuclear energy, one can be held to ransom overnight by some event beyond one's control.

Therefore, I applaud the noble Lord, Lord Tedder, in his plea for diversification. We have not heard anything about the solar furnaces of the Pyrenees. We have not heard anyone say, "Why don't we use the spin-off from Concorde where they produce the beautiful aluminium mirror, which is perfect for solar radiation and solar furnaces?" Why not? I think that it is because we are too obsessed with the politics that surrounds this subject. So I should like to take a stand and deliberately say that my human energies will be put into the search for sources of energy with which no one can ever interfere. In other words, I am talking about hydroelectricity.

Lord STRATHCONA and MOUNT ROYAL

My Lords, perhaps I may interrupt the noble Lord. Before he leaves the question of nuclear energy, is it not a fact that there is already enough energy in this country to fuel our breeder reactors almost indefinitely once they have been developed? Although I completely agree with the noble Lord on the subject of uranium, is it not quite a different situation—and I defer to the greater experts in the House—once we get on to the fast breeder reactors?

Lord ENERGLYN

My Lords, that I would admit, but it is only one unit of energy; it will not supply enough energy for the whole country. No one in their wildest moments would make that suggestion. As the noble Lord has said, it is one facet of the energy picture. I am not decrying this at all. I simply point out that whatever type of fuel is used for a thermal power station, it is vulnerable and has a limited life. But when we come to hydroelectricity, we are talking about eternal energy. That is the plea which I should like to make. We have some perfect examples staring us in the face. I would remind noble Lords of the imagination of President Roosevelt who listened to geologists explaining to him how, on recession, the ice caps of Canada revealed a gap through which water poured and drained dry the whole of the coolees along the 49th parallel, an area of agricultural devastation; and that that area is covered by basalt which produces beautifully rich soil, but there is no water. President Roosevelt took this suggestion seriously and rebuilt a dam—the Coolee Dam—to take the place of the ice. As a consequence of the Coolee Dam, today we see the most fertile area of America, with three crops per annum. To my mind that is the use of energy. Both water and electric power is produced.

The noble Lord, Lord Wynne-Jones, spoke about electrolysis. That is the way to produce electric power for electrolysis—the hydrogen economy. I could go on and cite Kariba, where 800,000 horsepowers are produced by a dam which is only 400 feet high, although admittedly there are 3,000 square miles of water behind it. However, that is not the point. The point is that only 400 feet of dam is needed to produce 800,000 horsepowers. I have spoken about this before and I should like to draw the attention of noble Lords to the nonsense that is talked about marine barrages. History tells us that the Dutch reclaimed their land from the sea by making barrages, not out of concrete or stone—they did not have any (concrete was not invented)—but out of clay. Why clay? Because the only geological deposit that the sea will not erode is clay. Why will it not erode clay? Because clay is water repellent.

What can we use to replace clay? The answer is polythene bags. In the last couple of weeks we have seen good examples of the refuse that has been piled on the pavements. Noble Lords will have noticed how rigidly they stand and the height to which they can ascend simply by being dumped. That is a demonstration of a technique, which I have described many times here before, of making barrages with plastic bags filled with refuse. We have done all the desk work on this. Where will it be first employed? The probability is that it will be the technique used in putting the barrage across the Bay of Fundy. Why do we not use it in the Bristol Channel?—but not for a barrage across the Channel; that would be a piece of sheer nonsense. Hydrologically, the most stupid thing we could do would be to put an obstruction across the sedimentary effluent coming from the River Severn—it would silt up the whole river in a matter of years. No, we want to imitate the Rance experiment of a barrage of a loop type extending between Cardiff and Newport filling plastic bags—I am sure that many ribald remarks will be directed at me about this—with all the tip refuse within 30 miles of Cardiff and Newport. It would result in a dam which would contain the sort of turbines that they have at the Rance, Straflow and all the others. There electricity would be generated. In addition, we would produce a runway which would give an airport within two hours of Paddington. Also, we would create an industrial centre in South Wales which could be all-electric. Indeed, my plea is that this country ought to go all-electric and not be dependent upon solid, liquid and nuclear fuels.

Finally, I should like to make one other point. This country is really saturated with energy. It must be, or otherwise we would not have over one million units of human energy rotting and stagnating here. The Government should get off the backs of those of us who are planting little acorns from which we hope great oaks will grow to recreate the virility and stimulus of the kind of British industry we should like to see for the future. That is how I would use my energy.

6.28 p.m.

Lord THOMAS

My Lords, first, may I join those who paid tribute to the noble Earl, Lord Halsbury, for initiating this debate and getting it off to such a good start. It is a fascinating debate to listen to and I am sure will be to read in tomorrow's Hansard. I suppose that it was triggered off by the events in Iran. I shall not spend much time talking about Iran; I spent nearly a year there as a pilot. The population there is very volatile and I have little doubt that the events that followed Mossadeq's weeping performance some years go will happen again, and oil will begin to flow from Iran in reasonable quantities in the not too distant future. But that does not alter the fact that we are facing an energy crisis, and that we have to make up a policy that will be long-term and stable. I echo Lord Tedder's comments on the need for that policy to be evaluated.

My contribution to this debate will be simple. It is to support Lord Ritchie-Calder's plea for the development of oil from coal in vast quantities. We are all grateful to the National Coal Board for initiating research on this subject, although a great deal is known about it already. Our friends in South Africa have taken the bull by the horns and are making a great deal of petrol out of coal. I would take my plea a stage further. We have to have an economical fuel for transportation. Trains can be fed by electricity. They run on tracks. But trackless vehicles and ships, and so on, have to carry their own source of energy in their own tanks, and the problem is to get the lowest cost per seat mile, or per ton mile, out of the starting point, such as a ton of coal.

It seems to me that what is needed is the development of the diesel compression ignition engine in small bore units which are high speed and which will take the place of petrol consuming engines that are used in the bulk of motor-cars, family saloons and small vans, today. Diesel fuel is highly regarded on the Continent, and it is about time that its development was more widespread in this country.

The noble Lord, Lord Wynne-Jones, has said that to make a liquid fuel out of coal you have to have hydrolysis hydrogen, and where do you get your hydrogen from? The cycle seems fairly simple. You promote nuclear energy which can be used to produce the electricity that is required to hydrogenate the coal and make it into a liquid, and there you have a wholly indigenous supply. You have your nuclear energy, your coal, your liquid fuel, and you have the electricity to drive trains, heat houses, and for other purposes. All this is going to take a great deal of time.

It is important too in the development of fuel for internal combustion engines that diesel fuel is not taxed out of existence. There must be a tax concession or encouragement for the development of these processes. If we could have a better understanding of the benefits of a differential taxation rate on fuel for automobiles and aeroplanes it would be of great value. Let us go forward in developing British diesel fuel from British coal, made with British nuclear energy.

Lord RAGLAN

My Lords, before the noble Lord sits down, may I ask him whether he is aware that diesel fuel in fact already carries a kind of differential taxation in that motor vehicles propelled on diesel fuel do more miles to the gallon than those on petrol?

Lord THOMAS

Admittedly, my Lords, but if the taxation were reduced still further they would do even better, would they not?

Lord ENERGLYN

My Lords, would the noble Lord permit me to add a rider to his important point? As your Lordships know, Diesel originally invented the engine for small coal and not for oil. So really we are only turning back the pages of history.

6.35 p.m.

Viscount HANWORTH

My Lords, I was uncertain right to the last moment whether I would be here for this debate, and so I asked to be put down as the last speaker. I have not prepared a full speech, so it may in some respects be a little disjointed, and in any case will be confined largely to supporting what noble Lords have already said. I think that very often this is the function of the last speaker.

The first point I should like to make is that we really must look at all this on an international basis, not only because morally we ought to, but because it has now been shown clearly from what has happened in Iran that in regarding our own interests we cannot do otherwise. Taking the broader picture we really must remember that the developing countries are going to need more and more energy if they are to develop at all. Do not forget that nitrogen fertilisers require a great deal of energy to produce them. Unless the developing countries have that energy, or somebody is going to do it for them, we remain with the situation that perhaps one quarter of the world—I think the figure at present is something like that—will remain grossly undernourished. I make that plea for a worldwide look at this problem, and not just a parochial look, which we are far too apt to take.

The second point I pick up again, and it was made by the noble Lord, Lord Wynne-Jones. Coal should be preserved for the future, so far as possible for the petrochemical industry. Even leaving that aside, it is all very well talking about using it for this and that, and our reserves, but so far we have proved utterly incapable of getting it out of the ground in increasing quantities, and that problem remains with us in spite of research into more sophisticated ways of mining. It does not look as though coal is going to be the answer to the maiden's prayer during this period when we are going to be short of energy, whatever else we try to develop as alternative sources.

Lord WYNNE-JONES

My Lords, will the noble Viscount allow me to intervene for one moment? He referred to coal and said that we cannot get it out of the ground in sufficient quantities. Is the noble Viscount aware that there is no problem in getting it out of the ground except the capital expense? In other words, if the community is prepared to do it there is no problem in doing it.

Viscount HANWORTH

My Lords, I would not wholly agree with the noble Lord because if you are going to employ labour you have to increase the labour force, and that takes a period of time. I think he would agree that the efforts that have been made so far to try to get more sophisticated ways other than mining have not yet paid off. There is opencast mining, but whatever you do about that you will get a strong reaction from the environmentalists.

I would join with a large number of other noble Lords in saying quite firmly that a nuclear programme is essential in the short term. There is nothing else round the corner to meet this energy gap. I also believe the time has come, particularly in view of the latest developments, when we must grasp the nettle and at least go for a full-scale breeder reactor now, and that has been emphasised already by at least three noble Lords. Such reactors in their use of raw material are 50 to 60 times more efficient than the present one. I should have liked to have quoted statistics but I do not have confirmation for them, so I shall only say that what we already have in the shape of spent uranium fuel and plutonium made in the process represents an enormous energy store which can be used with the breeder reactor. The noble Viscount, Lord Thurso, mentioned this increasing to a point when it had more energy than the whole of our coal reserves, though I am not sure under what circumstances that would occur—whether by the end of the century with existing nuclear plant or assuming some increase—and I am anxious not to make any statement about which I am not sure.

The unfortunate thing about the whole nuclear programme is that it has raised, presumably because of the atomic bomb, emotionalism and people have tried to justify their emotional feelings with logical arguments, always a highly unfortunate thing to do. I take the view that with care, certainly even with the fast reactor, we can completely forget the safety aspect of these reactors. Lord Rothschild was of that view and I believe it is accepted by many. Indeed, there is a book which points out that the danger of mining coal in terms of deaths and injuries is far greater than it is ever likely to be with a comparable nuclear programme.

I also differ from the noble Lord, Lord Wynne-Jones, about storage. Even taking the worst case, suppose we neutralised 100 square miles somewhere in the world to put it down so that that 100 square miles could not be used by future generations. That, judged against the way we are in many cases wantonly using up irreplaceable resources, such as tungsten and so on, would be a small price to ask future generations to pay. Thus, with the possibilities that now exist of producing a reasonably satisfactory solution for the disposal of waste, I write that off as unimportant.

What concerns me far more is the danger in the ultimate of nuclear blackmail. This will occur sooner or later, even with the situation as it exists now, so it is probably only slightly more likely if we continue with a nuclear programme. It is not the few who might try to make some sort of crude atom bomb who worry me so much as some of the more irresponsible nations of the world who might get their own atomic reactor and then have sufficient expertise to make a reasonable nuclear bomb. That is a real worry to me.

I suggest that possibly a good solution would be for the developed nations to use as much nuclear plant and generation as possible, leaving the oil much more to the smaller and developing countries. That would have many advantages. From the point of view of the threat of nuclear blackmail it would make life easier; it would be advantageous from the point of view of being able readily to use it; and it would make it easier for the developing countries, and we of course have the technical knowledge to do that. That is perhaps the only new thought I can produce today.

We should press on with alternative forms of energy, but I wish to stress that people often think that the more likely a certain project is to succeed, or perhaps to provide the answer, the more funds should be put into it. That view needs looking into carefully because if other countries—for example, America—are putting vast research into a given area, we might better employ our limited research in another area because, in this very vital consideration of getting more energy, I do not believe patents will be all that important. In that event, I would advise keeping a small team which could do their own bit of research and could easily be expanded if that was the way we wanted to go. If noble Lords do not like that idea, then the other answer is to see that we get reasonable arrangements with our partners in the EEC so that, say, Germany does one thing and we do another, if necessary on a swapping basis.

The point has been made, but I wish to emphasise the need for inter-party agreement. This is not a political issue and some noble Lords may remember that not long ago I had a Wednesday short debate on the need for inter-party agreement. I said that though there were many issues on which in the long term I thought it unlikely that inter-party agreement could be obtained, it was even more unlikely they would be solved without it. This question of energy is not potentially, as I see it, a political subject.

My Lords, I fear that for the first time for perhaps two years I have exceeded my allocation of 10 minutes, the reason being of course that I did not prepare my speech beforehand.

6.48 p.m.

Lord STRABOLGI

My Lords, I listened with great interest to the speech of the noble Viscount, Lord Hanworth, who volunteered unselfishly to speak last and who, if I may say so, made one of the best speeches in the whole debate. I agree with him and with the noble Earl, Lord Lauderdale, that this is a matter which should be approached on nonparty lines, and what has particularly impressed me has been the strictly nonparty approach in this debate, and we are indebted to the noble Earl, Lord Halsbury, for initiating it.

This subject is of course extremely important; energy is vital to our economy and indeed to our way of life, as has been said. A great many matters have been raised and some of the problems ahead have been posed, and posed most eloquently, by noble Lords, and I will do my best to answer them. I wish that we could know all the answers in advance, but the truth is that in many areas we cannot be sure of all the questions. One cannot have an energy policy in the form of a blueprint saying that, for example, in the year 2000 electricity will meet X per cent. of energy demand and coal Y per cent. and that so much of the electricity will come from nuclear power. The uncertainties are too great. We cannot predict precisely what the demand for energy will be, or what will be the most economical way of meeting it. Indeed, the recent events in Iran, which have been referred to today in almost every speech, and with which I shall deal later, serve only too well to highlight both the uncertainties with which we are faced and how rapidly circumstances can change. The noble Earl, Lord Halsbury, mentioned this point, and I agreed with him. He asked—quite properly—where the next crisis would blow up.

What we are trying to do is to develop a strategy that will move us in the right direction over a broad range of possible futures—and not one that will be perfect in one set of circumstances, but disastrous or very costly if things should not turn out as we expect. However, we are not completely in the dark about the future. To start with, there is very wide agreement that oil will get increasingly scarce and more expensive during the rest of the century and beyond, as has been said today. The Department of Energy's forecast is that oil prices will go on rising until, by the end of the century, they are double their present levels or more in real terms. We can therefore expect to see oil gradually withdrawn from its non-premium markets, where another fuel would do as well, and become concentrated once again in uses such as transport and petrochemicals, where there is no ready substitute. Nuclear power may provide the answer, but it will not provide a quick or easy answer to the world's energy problems. In such a high technology area you must learn to walk before you can run.

We must also bear in mind the need to reconcile energy policy with other objectives, such as environmental policy. We have recently set up the Commission on Energy and the Environment to advise on the relationship between these two important policy areas. As I think has been recognised today, by comparison with most other industrial countries, the United Kingdom is well endowed with energy supplies for the next couple of decades. We have substantial reserves of oil and gas, and very large reserves of coal—enough for 300 years at present rates of extraction. We can expect to be at least self-sufficient, and possibly net exporters of energy, for some years from 1980 onwards. But we should never forget that this will not cut us off from the long-term difficulties of energy supply which the world as a whole can expect increasingly to face. We therefore attach great importance to active participation in international discussions on energy, whether at summit meetings, the United Nations, the International Energy Agency, or in the EEC.

The Government give great importance to energy conservation, and the demand estimates on which our strategy rests imply an overall reduction in final energy consumption of about 20 per cent. by the end of the century. The Government will have to keep on stepping up their continuing conservation programme if these savings are to be achieved. We have made a good start by implementing since December 1977 a comprehensive 10-year package of measures.

Even after allowing for ambitious levels of conservation, our use of energy is likely to go on rising, including a large and growing demand for fuel as a chemical feedstock. As in the past, the main influence is likely still to be the rate of economic growth, as I think was implied by the noble Lord, Lord Robbins. The recent study by the International Institute for Environment and Development suggests a possible low energy strategy for the United Kingdom. The low energy futures advocated by a number of such groups are currently being assessed for the Government by the Energy Technology Support Unit at Harwell, in conjunction with the Department of Political Economy at Aberdeen University. We do not know of course what our rate of growth will be, and we are working on a range of possibilities, which were examined in detail in the Green Paper.

We have identified supply options which might give us a total of home-produced energy equivalent to between 475 million and 515 million tons of coal a year to 2000, if all were successfully developed. The figures included for coal and nuclear power are upper limits of what we can reasonably expect in the time available, and will not be achieved without very great efforts. We recognise that we cannot yet define the precise combination of home-produced suppliers, of conservation, and of imports which would provide the best way of meeting our energy needs at the turn of the century. We have therefore proposed a strategy based on developing conservation and a broad range of supply options, while maintaining what flexibility we can to make adjustments in the light of results and changing circumstances.

Lord STRATHCONA and MOUNT ROYAL

My Lords, may I interrupt the noble Lord on a point of clarification? I thought I heard him say that he was hoping that energy conservation would improve, or increase, by 20 per cent., and later he went on to say that our consumption of energy would go on increasing. If so, what is it that we are conserving—20 per cent. of what? The only true measure of conservation success would be if the demand for energy was actually going down by 20 per cent. Alternatively, is the noble Lord saying that we arrest what would normally be an upward trend by 20 per cent. less than otherwise would have been expected?

Lord STRABOLGI

I have been trying to paint a rather large canvas, my Lords, and I was making the general point that as our consumption went up so would our need for conservation grow. I was not going any further than that. What I was also saying is that in general we are aiming to be well placed to adopt whichever course turns out in the event to be cheapest and most acceptable.

Turning now to the supply options open to us, our most plentiful source of fossil fuel is coal. Through Plan for Coal we are showing our determination to maintain and modernise the industry at a cost of over £4 billion, and the National Coal Board considers that output could reach 170 million tons by the end of the century. But coal may also be required for uses other than those at present associated with it. Work is therefore also taking place on the technology of coal use and its conversion to substitute natural gas and synthetic crude oil. Nuclear power could also provide a substantial part of our energy needs—perhaps the equivalent of 95 million tons of coal in 2000. We may need therefore to be able to expand our nuclear capacity rapidly in the late 1980s and early 1990s, if that proved economically desirable and acceptable in other respects; and some of these various options have been referred to today.

By the year 2000, home-produced oil could still be contributing the equivalent of 150 million tons of coal—more than our current oil demand. The Government's first priority has been to get self-sufficiency as quickly as possible, so that the country benefits from the balance of payments improvement, greater security of supply and the tax revenues. We must make sure, though, that there is neither too sharp a peak in production in the 1980s, nor too rapid a rundown thereafter. Development of natural gas reserves should be managed, I suggest, with an eye to maintaining supplies to the markets, including petrochemicals, which can make the best use of its special qualities, and so to postpone the need to turn to expensive alternatives. The equivalent of 50 to 90 million tons of coal a year of our energy requirements might come from natural gas at the end of the century.

By the year 2000, however, oil and gas supplies worldwide, as well as in Britain, will have reached or be close to their peak. Their decline will have begun, or be just about to start. The major significance of oil and gas, then, is in the medium term, during the next two decades, rather than in the longer term of the end of the century and into the next. I am sure all noble Lords will agree that we must use wisely the breathing space they offer to prepare for the period when they will be in short supply, as the noble Viscount, Lord Thurso, said. The renewable sources are still at an early stage of development, and their contribution to energy supply in the period we are dealing with is expected to be small, although it could grow substantially in the next century. In answer to the noble Lord, Lord Tedder, to whose speech I listened with particular interest—and I shall have a little more to say about alternative sources later on—I would say that we are giving high priority to the necessary research and development work. Indeed, total Government spending on energy R & D in 1977–78 was in the nature of £254 million.

My Lords, we do not know what society will expect in the next century, but we might expect energy demand to continue to grow. We must be able to meet it in a period when our own production of oil is declining perhaps quickly, and when our production of gas is declining, or is about to decline. As we move into the next century, the world's available oil will need increasingly to be reserved for uses in which other fuels cannot easily be substituted, particularly in transport and in petro-chemicals. Coal may be able to fill some of the gap caused by withdrawing oil from heating purposes, but coal itself may increasingly be needed as a raw material for producing substitute natural gas, transport fuels and petro-chemicals, and the amount available for generating electricity may decline.

We cannot be certain at this stage when fusion power will prove practicable. At present, the only assured source in the longer term, apart from coal, is nuclear power, as I think has been rightly said by the noble Viscount, Lord Thurso, and by the noble Lord, Lord Zuckerman. Because of the limited availability of uranium, worldwide dependence on nuclear power almost certainly involves using fast reactors eventually. In the end, society as a whole will have to make the choice whether to accept fast reactors or whether, if there is no suitable alternative, to accept lower national living standards as a result either of diverting resources into very high-cost forms of energy or of energy shortages. While there can be no certainty at this stage that fast reactors will be needed, we need to keep the option open, as I think was recognised today, while continuing with the development of fusion power and renewable sources of energy. The Government's strategy therefore involves developing all the options I have mentioned, while maintaining what flexibility we can to make adjustments in the light of results and changing circumstances.

My Lords, I think it would be right if I said a few words about Iran, as this has been mentioned in every speech. From the point of view of this debate, of course, this has been the most serious recent development. The cutting of exports of crude oil from Iran since Christmas has meant that the only production has been up to about 600,000 barrels a day to meet domestic needs. The only exports have been of fuel oil produced in refining that production, which is not required in Iran and which was clogging up the storage tanks. Happily, with a somewhat more settled political climate, Iranian exports are now beginning again. It is still much too early, however, to be certain of a substantial, uninterrupted resumption, and we must wait to see whether the Iranians will wish to push exports to their previous levels; and, if so, whether the technical problems can be overcome. There is also still much uncertainty about the price they will charge and the method of sale they will choose. There must be some doubt, to say the least, as to whether the consortium which previously lifted most of the oil will resume its former position.

My Lords, the effect of the Iranian situation on oil prices has been worrying, as I readily admit. Some spot prices have reached almost double the official OPEC price, and this has led to a more modest but general and still worrying increase in many contract prices of around 1 dollar to 1.50 dollars a barrel. We hope that when OPEC meets shortly to discuss developments it will take a responsible view of the effects of excessive price rises across the board. These could be very damaging to world growth prospects, and particularly to the economies of the less developed countries. In the meantime, it is important that the consumer nations should do their bit towards meeting the shortfall in supplies, which will affect us not only now but in stocking up for next winter. At its meeting in Paris at the end of last week, the governing board of the IEA agreed on a 5 per cent. saving on oil consumption by its members. The United Kingdon will be playing its full part in implementing this decision; and, in answer to the noble Lord, Lord Strathcona, I can say that a Statement about this will be made in another place in the near future by my right honourable friend the Secretary of State, and I am sure it will be repeated in your Lordships' House. I am hopeful that these measures, coupled with a resumption of exports from Iran, will serve to stabilise the world situation.

The noble Lord, Lord Strathcona, also asked about oil stocks. The latest figures for oil stocks for the United Kingdom show that we are holding 191 days on the IEA basis and 88 days on the EEC basis. This is equal to 72 days of expected consumption. The noble Earl, Lord Halsbury, referred to a depletion policy. The Government's initial priority in the development of our offshore resources has been, of course, to build up production as rapidly as possible, so that we can benefit from the balance of payments improvements, the greater security of supply and the tax revenues. We are now approaching the point of net self-sufficiency in energy, and during the 1980s we have some choice between early oil production at higher levels, with associated early additional benefits to the economy, and reserving supplies for the 1990s and beyond to assist the economy and the energy sectors in achieving a smooth transition to reliance on imported oil (which is likely to be scarcer and more expensive) or alternative indigenous fuels.

We must avoid, I suggest, both too sharp a peak in production and too rapid a decline thereafter if we are to ensure that when production runs down it does not do so at such a rate as to cause unmanageable problems in switching to alternative indigenous supplies or paying for increased imports. This, of course, is one of the factors which made us decide to control the production of our North Sea oil—a point which I thought was not sufficiently appreciated by my noble friend Lord Energlyn; but I do not want to trespass today into these fields, which we pursue frequently in other debates.

Turning to the current Iranian situation, I understand that BNOC has been able to respond by offering previously uncommitted supplies to two oil companies in the United Kingdom who have been experiencing difficulties in obtaining crude. However, BNOC cannot at short notice dramatically increase the amount of oil supplied into the United Kingdom. It must honour its other commitments if it is to build its reputation as a responsible oil trader. BNOC's disposal policy is, in the first instance, a matter for the corporation's commercial judgment although we expect it to take Government policy fully into account. The noble Earl, Lord Halsbury, referred to gas. So far as the use of gas is concerned, the Government's policy is that our resources should be depleted in a controlled manner, with supplies going so far as possible to those markets where the special qualities of gas make it an especially valuable fuel.

The noble Lord, Lord Tedder, and my noble friend Lord Energlyn referred to alternative sources of energy. In this connection, I am, of course, referring particularly to wave energy, tidal energy, wind energy, solar energy, crops and organic wastes providing fuel materials and geothermal energy. These alternative energy sources are still at an early stage of development, and their contribution to meeting the country's energy needs by the end of the century is expected to be small, although it could build up substantially in the first quarter of the next century. I can say that the Government are giving high priority to the necessary research and development work on these sources and in June last year an increase in the funding available for this work was announced, taking the total amount of money available to £16 million. It is not, however, the level of funding which is the limitation to making faster progress on these sources but rather the state of the new technologies involved. I am sure both noble Lords, with their great technical knowledge, will appreciate that.

With regard to nuclear, or atomic, energy, Government policy has been to maintain the capability rapidly to expand nuclear power if that course proves to be economically desirable and acceptable in other respects. To do this, we need a proven reactor system or systems and a manufacturing industry able to produce them. We also need to ensure that fast reactor technology will be available to us if we need it. With regard to fast reactor policy, the prototype fast reactor has been operating at Dounreay since 1974 and the Government are currently reviewing policy towards the next stage of the system's development, including the possible construction of a full-scale commercial demonstration plant. The Government have given an undertaking that any decision to build a plant would be subject to a public inquiry. The precise procedure has not yet been settled but the inquiry would not be limited to local matters and would enable wider relevant issues to be considered.

Lastly, the noble Lord, Lord Tedder, asked about the EEC energy research and development programme. The United Kingdom has fully supported the current four-year energy R & D programme in the Community and many United Kingdom organisations are participating in this. In considering the Commission's proposals for a second four-year programme to run from 1979 to 1983, however, we have noted that these proposalswould call for some £80 million from the Community budget and have insisted that such a sum should be agreed only after the most careful scrutiny of the proposals. What we are questioning is the size and scope of the new programmes and the balance between topics. I should emphasise that we fully recognise the importance of this research. It is precisely because of this that we are anxious that scarce resources of manpower and money should be used to the best advantage.

The noble Earl, Lord Lauderdale, asked about coal from under the sea. The National Coal Board are considering the possibility of exploiting coal reserves under the sea, and the techniques of underground gasification currently being studied by the Board might find an application in this area. There are, however, considerable technical problems involved and it is unlikely that a contribution to meeting the country's energy needs can be attained from this source for a considerable period of time. But I am sure that one day we shall be able to get at it.

My Lords, I hope that I have answered most of the points raised by noble Lords. Remembering what the noble Earl, Lord Halsbury, has said, I do not want to speak for too long. I am afraid that I have spoken longer than I should have done, but if there are any other points I will write to noble Lords.

7.15 p.m.

The Earl of HALSBURY

My Lords, in rising to bid au revoir to this subject and not adieu because I am sure that it will be in front of us at least once per Session for an indefinite time to come, I should like to thank all those noble Lords who responded to my invitation to take part in the debate and to comment on the fact, which is obvious to you all, that you have, not for the first time, put on a performance unmatchable by any other legislative assembly in the world. It started with oil; then the geology of oil from Lord Energlyn; then oil substitutes by hydrogenation of coal by the noble Lord, Lord Ritchie-Calder, and then hydrogenation for chemical feed-stocks from the noble Lord, Lord Wynne-Jones, to the noble Lord, Lord Tedder, who has come all the way from St. Andrews to tell us about his preoccupation with the photolysis of water which, in my view, is the best bet for the utilisation of solar energy one day in the future.

In thanking those who have come a long distance I look at the noble Viscount, Lord Thurso, who has come farther than anybody else and thank him for the support he has given me in his remarks on atomic power. The noble Lord, Lord Zuckerman, gave us his characteristic blend of wide-ranging knowledge and experience and blunt common sense; and I was grateful for his comments on some of the environmental problems. The noble Earl, Lord Lauderdale, speaks with authority based on many years of service to this House in Committees and constant attention to our energy affairs on a day-to-day basis. He is a master of detail; he has put it at our service this afternoon, and I am grateful correspondingly.

I was glad at having avoided a demarcation dispute with my noble friend Lord Robbins on the subject of economics and that I managed to get away with it without him finding anything on which he was in disagreement with me. I say I am glad because, although I never had the privilege of attending his lectures, I regard myself as an honorary pupil of his through close study of his very interesting writings. The noble Lord, Lord Sherfield, combines dual qualifications in the diplomatic field and in the nuclear power field and I am sure that he would be ideal adviser to monitor what is going on in the mind of President Carter.

The noble Viscount, Lord Sidmouth, does not speak very often in this House and I wish that he spoke more. He gave an example of what careful housekeeping can do. Finally, the noble Lord, Lord Thomas, was kind enough to refer to the importance of the diesel. This is a great British achievement. It is not generally known that this country used to (and for all I know still does) export more diesels than the USA makes. That was the gift of differential taxation at one time. The noble Viscount, Lord Hanworth, enunciated a principle with which I am in agreement; namely, that we ought never to use gas where we can use oil; we ought never to use oil where we can use coal; and we ought never to use coal where we can use nuclear power or anything wherever we can use revenue resources, provided we can manage to do it.

I am grateful to the noble Lord, Lord Strathcona and Mount Royal, for tackling the price structure problem, which is not the most glamorous part of one's homework but it is fundamental. Clearly the present price structure is unstable and can only lead to rises. Finally, I thank the noble Lord, Lord Strabolgi, for his attention to the debate and for his careful answers to as many of the points as he could cope with in the time available. I hope that he will report to his right honourable friend and will assure him of the high quality of the debate which was entirely non-partisan in quality and of the singular unanimity on the question of priorities demonstrated by everybody who took part in it. I beg leave to withdraw the Motion standing in my name.

Motion for Papers, by leave, withdrawn.