IEEJ：November ©IEEJ 2023
Special Bulletin
A Japanese Perspective on the International Energy Landscape (661)

November 2, 2023

What Lessons Should Be Learned from the Oil Crisis 50 Years Ago?
Ken Koyama, PhD
Chief Economist, Senior Managing Director
The Institute of Energy Economics, JapanOn October 30, the Institute of Energy Economics, Japan, held an energy symposium titled“Energy Security -- 50 years after 1973 Oil Crisis” at the Keidanren Hall in Tokyo. The symposium
took a face-to-face and online hybrid format, attracting a total of more than 700 participants.
At the symposium, keynote speeches by Yoshifumi Murase, Commissioner of the Japanese
Agency for Natural Resources and Energy, and William Martin, former U.S. Deputy Secretary ofEnergy and current Chairman of Washington Policy Analysis, were followed by speeches on lessons
and initiatives for the energy industry by industry representatives -- Shunichi Kito, President,Petroleum Association of Japan; Kazuhiro Ikebe, Chairman, Federation of Electric Power Companiesof Japan (online participation); Takehiro Honjo, Chairman, Japan Gas Association (onlineparticipation); and Ichiro Takahara, Chairman, JOGMEC. After a break, speeches on energy security
in Japan were given by Hirofumi Matsuo, a senior staff writer for the Nikkei Shimbun newspaper;
Keisuke Sadamori, Director, Energy Markets and Security, International Energy Agency (onlineparticipation); Jun Nishizawa, Senior Vice President & Group CEO of Natural Gas Group, Mitsubishi
Corporation; and me. Then, I moderated a panel discussion joined by Matsuo, Sadamori, Nishizawa,and Martin.
The oil crisis 50 years ago was the first international energy crisis to rattle the world. At themercy of soaring crude oil prices and threats to cut supply through the Arab oil embargo, Japan andother developed economies were hit hard, with oil-consuming countries’ cooperation collapsing.
Plagued with a fear that the Japanese economy would be forced to end high growth and sink further,
Japan had no choice but to implement a desperate survival strategy. At the center of the strategy was
the enhancement of energy security measures, including the improvement of energy efficiency, thediversification of energy and import sources, the promotion of relations with oil-producing countries,
and the expansion of oil stockpiles. Thanks to all-out public and private sector efforts, Japan overcame
the crisis and laid the foundation for later prosperity.
Last year, however, the world again faced an international energy crisis and had no choice
but to give top priority to energy security. Due to Russia's invasion of Ukraine, energy supply from
Russia, known as the world’s largest energy exporter, became a risk factor, exposing the internationalenergy market to unprecedentedly high prices and supply insecurity. It has become essential forWestern countries to phase out their dependence on Russia and strike a balance between energy
security and decarbonization, another important challenge. At the same time, however, society has
been reminded of the importance of energy and deepened its recognition that the political, economic,and social impacts of rising energy prices and costs are enormous.
In light of this situation, energy policy planners, industry representatives, high-level experts,
and other participants in the symposium discussed lessons learned from the oil crisis. Coincidentally,1

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the largest Middle Eastern military clash or war since the Fourth Middle East War, which triggered thefirst oil crisis, began on October 7 in Palestine. The world has become aware of the great risk factor
regarding Middle Eastern oil supply, which has grown even more important as a result of initiatives tophase out dependence on Russia. Based on the extremely important discussions that took place in thiscontext, I would like to comment on issues that I felt were particularly important, especially those thatpose challenges for Japan.
First, from past crises, we must learn that excessive dependence on specific sources for thesupply of critical strategic goods, such as energy, can pose a potentially serious threat, even if it is nota problem in peacetime. Excessive dependence on Middle Eastern oil was one of the root causes ofthe first oil crisis. By the same token, excessive dependence on Russian energy was one of such causesof the Ukraine crisis. Given the world’s future energy transition, we must consider how to secure thesupply of critical minerals that are indispensable strategic materials for the transition. Based on theexperiences with the two crises, the world needs to strengthen its preparedness to prevent a third crisis
from occurring or limit the impact of a third crisis to as minor a level as possible. This means that welearn lessons from past crises. However, what complicates the issue of excessive dependence on
specific supply sources is the fact that these sources are the most low-cost or competitive suppliers. If
we were to resist excessive dependence on competitive suppliers, we would have to be prepared tobear additional costs. How to implement a strategic response based on this possibility will be the key
to preparing for future crises.
Second, I would like to emphasize the importance of the Middle East and fossil fuels, which
has come to the fore once again. At one point, there was a view that the importance and presence ofthe Middle East, which depends on fossil fuels such as oil for national management, would decline as
decarbonization is strongly promoted. Then, Middle Eastern oil-producing countries themselves wereenveloped in insecurity. As the Ukraine crisis has brought the importance of fossil fuels into thespotlight, however, there is a growing view that fossil fuels will play an important role in the longenergy transition process as indicated by present realities in the world. Middle Eastern oil-producing
countries for their part are increasing their influence on the energy market and regaining their selfconfidence. Furthermore, the recent situation in Palestine has made it increasingly important tostabilize the Middle East and ensure a stable energy supply from the region. As mentioned above, amid
the growing recognition that fossil fuels will not easily exit the market, the international energy
industry has seen strategic efforts such as large-scale corporate acquisitions and the development andenhancement of new business models mainly for oil, gas, and LNG.
In this regard, Japan faces serious challenges. While promoting an energy transition thataims to achieve both decarbonization and energy security, Japan is required to ensure a stable fossil
fuel supply. In order to strengthen relations with the Middle East on which Japan now depends for
94% of its crude oil supply, Japan must rethink and strengthen its strategy for the region once again
through the combined all-out efforts of the public and private sectors, as is the case with the oil crisis.
As Japan proceeds with talks on the next Strategic Energy Plan, it should go back to the basics andhave full-fledged talks on what is required to secure stable oil and LNG supply. While pursuing ideal
goals regarding decarbonization, Japan should fully consider what is likely to happen and a strategy
for responding to any occurrences. With regard to how to secure long-term LNG contracts that havecome into the spotlight again due to the Ukraine crisis, Japan may be required to consider revising its
strategy boldly as necessary from the perspectives of policies, systems, and market design.
Third, the promotion of non-fossil energy sources and the decarbonization of fossil fuels areindispensable for achieving both decarbonization and enhanced energy security. With regard to the2

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former, it is extremely important to thoroughly improve energy efficiency, maximize the use ofrenewable energy, and make effective use of nuclear power. At the symposium, many people calledfor the promotion of the restart of idled nuclear power plants and the effective use of existing nuclear
power plants to achieve the so-called 3E’s – economic efficiency, energy security, and environmental
protection. In addition to pressurized-water reactors of which the restart has made progress, Japan
should promote to restart boiling-water reactors in the future. Japan should play a leading role in thedecarbonization of fossil fuels by promoting international cooperation with Middle Eastern and otherresource-rich countries, as well as Asian and other countries, to build international supply chains anddevelop institutions and rules for their utilization. Japan is required to develop a comprehensive
strategy for the next 50 years.

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