International Energy Agency (Hansard, 8 March 1979)

§ Mr. Benn

At its meeting on 1 and 2 March the governing board of the International Energy Agency agreed on the programme of action to deal with the present difficult situation in the world's oil markets. It provides for firm, prompt and co-ordinated action by the participating countries to reduce demand for oil on the world market by the order of 2 million barrels per day which would correspond to about 5 per cent. of IEA consumption.

The Government strongly endorse this programme of action and particularly welcome the fact that all member countries of the International Energy Agency were able to support it. On this basis we shall be preparing, as soon as possible, specific measures for the United Kingdom's contribution to the common effort. They will include a substantial reduction in the use of oil in power stations.

Following is the programme:

Action on the Oil Market situation in 1979

Adopted by the Government board on 1–2 March, 1979

The governing board

(a) having examined the present difficult situation in the world oil market, concluded that due to the current supply shortfall there exists a serious risk that in 1979 oil supplies could fall short of anticipated oil demand by some 2 mb/d;
(b) having recognised that there are major uncertainties about the future oil market situation which require continued ongoing assessment of actual developments;
(c) having concluded that failure to take timely action at this stage could result in further deterioration over the coming months;
(d) having agreed that the impact of the potential shortfall, if uncontrolled, in itself and mits effect on prices, particularly in the spot market, could lead to grave damage to the world economy;
(e) agreed that participatig countries should take firm, prompt and coordinated action
1. (i) to improve the supply/demand balance;
2. (ii) to implement flexible stock policies, while providing an adequate level of stocks prior to next winter;
3. (iii) to relieve current abnormal market conditions, with their pressures on prices;
(f) agreed that IEA countries will contribute to a stabilisation of the world situation by reducing their demand for oil on the world market. The reduction would be in the order of 2 mb/d which would correspond to about 5 per cent. of IEA consumption. Each par ticipating country will regard this as guidance
in the policies it will pursue to achieve its contribution to this reduction. These policies are expected to yield equivalent results in Participating Countries;
(g) agreed accordingly that each participating country will take short-term action by promptly applying effective and adequate methods appropriate to its individual circumstances to:
1. (i) reduce demand for oil
  - — by more efficient use of energy and avoidance of energy consumption which is not essential for maintaining a high level of economic activity;
  - — by utilising existing possibilities for short term fuel switching away from oil, replacing it wherever possible by alternative forms of energy;
2. (ii) maintain and develop indigenous energy production at high levels;
3. (iii) take into account the potential to shift to non-premium grades of crude oil, adjusting regulatory systems wherever possible and advisable;
4. (iv) adopt, where necessary, domestic pricing policies which would support the achievement of the above objective;
(h) agreed that the short-term situation must be viewed against the background of its long-term implications for the energy market, and that consequently these short-term actions should, insofar as possible, be consistent with and reinforce current and prospective actions of a longer term nature (including the development of alternative resources) which would contribute to the maintenance and improvement of oil market balance;
(i) noted and welcomed statements by individual countries on action already taken or under consideration in order to meet the present situation;
(j) expressed its expectation that oil companies pay particular attention in the present situation to the need for the fair distribution of oil among consuming countries;
(k) noted that the foregoing measures should contribute substantially to the maintenance of a reasonable flow of oil supplies to other countries as well as to IEA countries;
(l) welcomed the actions by oil-producing countries to maintain high production;
(m) instructed the Standing Group on Emergency Questions and the Standing Group on the Oil Market to monitor carefully the oil supply situation as it develops and the adequacy of measures taken by Participating Countries to cope with the situation, to meet jointly each month for that purpose and to report to the Governing Board with recommendations as appropriate;
(n) agreed to keep world oil market conditions under close review and to adjust the IEA response in accordance with changing developments.