IEEJ：February ©IEEJ 2023
Special Bulletin
A Japanese Perspective on the International Energy Landscape (622)February 3, 2023

What Should the World Learn from the Oil Crisis 50 Years Ago (4): Impacts on
Energy Transition
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanThe last serial report on what the world should learn from the oil crisis 50 years ago takes
up the impacts on energy transition.
As described earlier, the first oil crisis came as a great shock to the international energy
market, leading the world to turn around. The turnaround represented the beginning of the end to the
century of oil. Before the first oil crisis, oil’s share of the international energy market was rising
persistently. Historically, the age of coal lasted long after coal became a central modern energy
source on massive energy consumption under the industrial revolution launched in the 19th century.
The international oil industry entered a development stage in the second half of the 19th century,
when oil production mainly in the United States expanded to meet growing oil consumption. Until
around the 1940s, however, coal accounted for some 70% of global energy consumption, remaining
a central energy source.
However, economic reconstruction and rapid economic expansion mainly in developed
countries after World War II required even more energy consumption than earlier. Then, Middle
Eastern oil in a full-fledged production expansion stage played a central role in fulfilling the rapidly
growing global energy demand. Taking advantage of the ease in handling of oil as liquid, oil’stransportation competitiveness increased through the development of large tankers and oil’s
excellent price competitiveness, massively supplied Middle Eastern oil rapidly replaced coal, raising
its position to the center of global energy supply. In Japan, the rapid oil consumption growth wascalled the liquid energy revolution, meaning that liquid oil rapidly replaced solid coal as a centralenergy source. Oil’s share of global energy consumption continued increasing, reaching 49% in
1973.
However, the oil crisis forced the trend to change dramatically. Learning lessons from theoil crisis, developed countries took leadership in enhancing energy security policies to overcome
their vulnerability attributed to their excessive and short-sighted dependence on economical oil andon the Middle East as an oil supply source. As noted in my earlier reports, they promoted energy
efficiency and conservation policies, oil substitutes such as nuclear energy and natural gas/LNG andcoal utilization. New energy development promotion started then.
Nuclear energy became a symbolic substitute for oil. Global nuclear power generation
began to increase in the early 1970s and its growth accelerated after the oil crisis. From 204
terawatt-hours in 1973, global nuclear power generation increased more than three-fold to 712 TWh
in 1980 and seven-fold to 1,489 TWh in 1985. Given the lead time required for building nuclear
power plants, nuclear power generation expansion triggered by the oil crisis might have started in the1

IEEJ：February ©IEEJ 2023
1980s. Nuclear power generation continued increasing later, reaching 2,001 TWh in 1990, about 10
times as much as at the time of the oil crisis. Then, developed countries, or the members of theOrganization for Economic Cooperation and Development, accounted for 1,734 TWh or nearly 90%
of global nuclear power generation, indicating that developed countries in the face of the oil crisis
expanded nuclear power generation.
The promotion of substitutes for oil was combined with energy efficiency andconservation measures to cause a major change in oil’s share of global primary energy consumption.
The share peaked at 49% in 1973 and followed a downtrend. Global oil consumption seesawed or
stagnated amid global recession after the oil crisis until the first half of the 1980s. Supported byrobust oil demand expansion in developing countries later, however, oil consumption continued
increasing. In fact, global oil consumption soared by 69%, from 55.69 million barrels per day in1973 to 94.09 million bpd in 2021. However, oil’s share of global energy consumption slipped below
40% in 1985 and followed a downtrend, sinking to 31% in 2021. The share was higher than 26% forcoal and 24% for natural gas, showing that oil remained the largest energy source. Historically,
however, it is clear that oil’s share suddenly stopped its expansion and followed a long downtrend inenergy transition triggered by the first oil crisis.
The Ukraine crisis has greatly shaken the world again. The international energy market has
become turbulent, leading energy security to become a top priority again. Even before the Ukraine
crisis, however, the world enhanced decarbonization efforts, leading the structural shift from fossil
fuels to non-fossil fuels, the promotion of electrification, and the development and diffusion of
innovative energy technologies to become priorities. These priorities were expected to drive a newenergy transition.
How would the Ukraine crisis and the new emphasis on energy security influence thefuture energy transition? Over the short term, many countries have chosen to utilize all energy
options including coal to achieve stable energy supply as a top priority, resulting in some phenomenathat run counter to decarbonization in some sense. At the same time, however, initiatives have beenenhanced to reduce dependence on fossil fuels (particularly Russian ones) to promote both energy
security and decarbonization over the medium to long term. Symbolizing such moves is theEuropean Union’s REPowerEU plan. Developed countries have generally indicated an attitude ofgoing in this direction. In this sense, the Ukraine crisis has the potential to accelerate the energy
transition that began earlier to make progress.
However, I view the future energy transition as being complicated by the Ukraine crisis.
First, energy price or cost hikes’ social, political and economic impacts are too great to be ignored.
Even developed countries may have to prudently watch whether society would accept an energy
transition accompanied by energy price hikes. This point is even more important for low-income
developing countries. Even if decarbonization is pursued finally, more pragmatic approaches may befavored. Second, the viewpoint of comprehensive economic security considering not only energy but
also relevant materials and infrastructure may play an important role in the future energy transition.
Important in this respect may be a rare earth/minerals or critical minerals issue. Not only
decarbonization but also the tightening supply-demand balance for critical minerals for the energy
transition and the world’s dependence on certain countries for their supply will become even moresignificant as the division of the world develops into a real structural problem. The future energy
transition may undergo the complicated impacts of the Ukraine crisis and geopolitical realities.
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