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Vol.1972/0153

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COMMISSION OFTHEEUROPEAN COMMUNITIES
?
ï
*
COM(72))1201final
Brussels ,4October1972
ENERGYPOLICY:PROBLEMS ANDRESOURCES 1975-85
(submittedtotheCouncil "bytheConmission )
COM(72)1201final

EnergyPolicy.VProblemsandresources J573.-jp.
Contents
HTTRODUCTIfW
CHAPTER 1:PROSPECTS PORKHEROi "DElCuID
A.llcwfeatures ofthe,energymarket
B.Prospects forKorldenergydemandin19^5
C.TheConjmunity 'senergyneeds
CHAPTER 2:A.Oil
B.ITaturalgas
C#Coal
D.ÎJuclearenergy
CHAPTER 3:PR0BLE3IS CFE1CCR3Y POLICY
A.Structure ofdemand
B.Oil:thekeyelemontinsupplies
C,Titopossible linesofdevelopnent intheoilmarket
1.Firstcase:astablemarket
2,Secondcase:largeincreases inoilprices
D,Restrictions onsecurity ofsupply
CHAPTER4îTHEMEANSOFACTION
Abbrevuajions:
Mtce=smilliontonnesofcoaléquivalent
(7,000lcilocalories perkg)=7.10kcal
Iltpes»milliontonnesoiléquivalent
(10,000kilocalories perkg)=10kcal
kgce=kilogramme coaléquivalent (7,000kilocalories )
GWe=gigawattofelectricity =10lew
gGcal=gigacalorie =10kilocalories

INTRODUCTION
Energy policy isintended tocreate asituation inwhich consumers may
obtain theprimary energy thoy need ,inthemost favourable conditions
asregards quantity ,quality andprice .
Todothis itmust take into account notonly factors which arespecific
totheenergy economy (developing patterns ofdemand ,availability of
thevarious types ofenergy ,theeconomic andpolitical conditions
affecting thesupply ofenergy from different sources ,etc.)butalso
factors external totheenergy market itself (forexample ,the
maintenance oftheeconomic andfinancial equilibrium ,ortheexigencies
offoreign ordomestic social policy ).
Inanalysing these constraints andthus defining theextent towhich
freedom ofaction ispossible ,anidea emerges ofthevarious combinations
available forselection .Such isthepurpose ofthepresent document ,
1based first onthe study ofdemand prospects andsecondly onthe studies
ofthefuture supply situation fortheprincipal sources ofprimary
2energy ;itisadescriptive synthesis oftheessential problems of
energy policy which will beencountered between nowand19S5 »Itseeks ,
moreover ,toidentify theavailable policy options and toevaluate the
consequences ofeach .Thus itcontains thebasic reasoning underlying
theguidelines proposed bytheCommission in"Progress necessary in
Community energy policy "^.
1Forecasts ofprimary energy demand intheCommunity ,1975-^0-55
(Doc.XVIl/153/72).
2Medium-Term Forecasts andGuidelines fortheOilSector (Doc.XVII/134/72F),
Mediuia-Term Forecasts andGuidelines fortheGasSector (Doc.XVTI/3&2/71F),
Second Illustrative Nuclear Programme fortheCommunity (Doc.XVTl/341/?1?).
Doc .XVII/214/72F. .

-2-
CHAPTER 1. ,
PROSPECTS FORENERGY DEMND .
A.Newfeatures oftheenergyinarket
Themaincharacteristicsof"theworldenergymarketfromi960to1970
wereampleavailability and.relatively lowprices.
Oilwasavailable invirtually unlimited quantities andatrelatively
lowprices,andcoveredmostofthenewdemandwhicharose...Thiswas
particularly truesofarastheCommunity ,wasconcerned ,whichreaped
thebenefits oftheactivecompetition intheoilmarket./The,result
wasthatthepriceofoilwasthelevelofreference forthepricesof
»
other ,typesof.energywithwhichitislikelytocompete. .
Naturalgas,anindigenous andexpanding sourceofenergysupply,-shared
in.thegrowthinenergydemand,andevencapturedcertainmarketsjfrom
oil,products .. .- ■, .,
Community coal,hampered byhigherproduction costs,continued todecline.
.Therearesectors felectricity generation andcoking,inwhichcoalcan
stillmajkeaparticularly ..important .contribution ■;tothe,/fulfilment of
energyrequirements ,buteveninthesesectorsithas.onlybeen;ableto
maintainitsposition byvirtueofpublicfinancial support.r..Imported
coalcontribute ?onlyrelatively ,modestlytothetotalvolumeof.energy
needs,butitisnevertheless ofacertainimportance to.thosewhoconsume
it,notablythesteelindustry .
Theprogress ofnuclearenergywashinderedbothbythelowpriceof
"conventional "energyandbytheinertiawhichaffectsthegeneral
adoption andapplication ofnewtechniques .

-3
Difficulties inthemarketsforcertaintypesofenergyhaveoccurred
fromtimetotimeduringthisperiod,causedbymarketforcesor"by
political events.Examples ofthiswerecokingcoalin1969-70and
oilin1967and1970-71# Ingeneral,however,theCommunity wasable
duringtheten-year periodtoobtainitsenergysupplies undervery
Ifavourable conditions .
Since1970thestructure ofthemarkethastendedtochangeunderthe
influence ofanumberoffactors .
Whilepetroleum hasestablished alastingdomination ofenergysupplies ,
theconditions ofsupplyarebecoming morerestrictive thaninthepast.
Worlddemandforecasts showthattheCommunity willhavetocompetewith
otherbuyers-principally withtwootheijgreatindustrial powers:Japan
andtheUnitedStates-bothinitsdealings withtraditional suppliers
andinestablishing supplies fromnewsources.Also,theoil-producing
countries havebecomeawareoftheadvantages theywouldgainina
sellers' market.Byfiscalmeasures theyhavesecuredaproportion of
theincomefrompetroleum andarenowseekingtointervene moredirectly
inthemanagement oftheirnaturalresources .
Thusalltheindications arethattheeasysupplysituation ofthe60s
haslittlechanceofbeingmaintained .Itistherefore appropriate to
examinethelong-term trendsofenergydemandandsupplyandindoing
sotoconsider theCommunity inthewidercontextoftheinternational
market.Inthiswayitwillbepossibletodefinetheproblems which
energypolicywillhavetoresolve.

Theyear1985has"beenchosenasthe"horizon *1ofthestudy,notasa
firmdatebywhichonewouldexpecttoseeadefinitesituation ,but
ratherasapointofreference forevaluating marketconditions during
theperiod1980-90,Thischoiceof"horizon"allowsboththeevolution
ofcurrently knownfactorsandcertainpossible hypotheses onlonger
1ternstructural changesto.be_takenintoaccount .
B.Prospectsforworldenergydemandin19.8.5
TheCommunity alreadydepends onimportsforahighproportion ofits
energysupplies .Evenmoresothaninthepast,development ofdemand
intheothereconomic zonesoftheworldwillinfuturebeaconstraint
tobeallowedforbyenergypolicy.
Thoughtheoutlookfortheevolution ofenergyneedsvariesaccording to
thedegreeandtypeofeconomic development ofeachcountry,itis
certainthatdemand ,,at.the.world .level,willconsiderably increasein
future.
Theestimates whichfollowarenecessarily basedonlesssearching studies
thanthoseusedforthedetermination ofCommunity energyneeds.In
spiteoftheirmarginsofuncertainty ,theygiveasatisfactory idea-at
leastintheirorderofmagnitude-oftheproblemsofworldenergysupply
which ,mustbesolvedinthenearfuture.
Theannualaveragerateofincreaseinworldenergyconsumption from1960
to1970 ,wasover4«5/°»Prom1970to19^5"theratecouldbeover6fo,
Thepresentworldenergydemandissome16,000milliontcc.
Forthesignificance ofmedium-andlong-term -timescales inenergy
forecasts ,see"OutlookforprimaryenergydemandintheCommunity
1975-80-85"(doc.xm/153/72-p),p.4.

-5-
Foreccesofworldenergydemandin1985('000,000tcc).
Actual1970~m"m1•■■ " 1
ïbrecasts 1J35 j
Solid
fuelLiquid
fuelllatural
gasPrimary
elec.Total
energySolid
fuelLiquid
fuel!iïatural
IgasPnmaiy
elec.Total I
energy g
!Industrialized countries
■withfr®e~market economies 1110 1910 820 2304120 1100 4430 2050 1770 9350:
»
Includiitg
mi(10) 363 .685 88 831219 2551410 .345 3452355I
,US 4801050 680 802290 6701700 1130 7004200I
1Japan 90290 525410 105760 10 1751050|
:Countries withplannedand
centralized economies .1180 445 325 652015 1870 1520 1150 2604800I
;Developing countries 125 330 70 40565.230 1100 250-2201800|
World 24152685 1215 3856700 3200 7050 3450 2250 15950
(Totalin*000.000tpe)1690 1880 Ô50 2704690 2240 4935 '2415 157511165

-6-
Theneedsofindustrialized countries wxthfree-market economies will
reachalittlemorethandoublethepresentlevelsinfifteenyears.
Mostofthemwill,beableonlypartially ,andtoagreaterorlesser
extent,tocovertheirneedsfromindigenous resources .Theywill
therefore bebuyingincreasing quantities intheworldmarket.
Thisappliesespecially tooil(about3»500millionteewillhavetobe
imported),butforthisfuelthepresentandfuturecircumstances of'
thethreeprincipal economiczones(EEC,USA,Japan)exhibitdifferences
whichareworthemphasizing :
-whileintheUnitedStatesoilwillbecomeslightlylessimportant
proportionately (from45to40$)overthenext15years,the'converse
willapplyinboththeCommunity andJapan(from55"to60$from
70to72$)*,
-inthestructure oftheconsumption ofoilproducts intheUS,the
sv.pplyofproductsfor"motorfueluses"ispredominant (some60%)',
refiningisorientated towardsmeetingthisdemand(residualfueloil
represents only13$)'andhashidnomajordifficulties intaking
expensive crudesbecauseofthehighmarketvalueoftheprincipal
products.Thesituation isquitedifferent intheCommunity and-
Japanjwherefueloils'(heavyandlight)fordomesticandindustrial
heatingpurposesaretheprincipal products (allfueloils,65$and
'75%respectively)' }consequently ,anyincreaseinthepriceofthe
crudeaffectsthepriceoftheseproducts anddiminishes competitiveness
ininternational markets.
Inviewoftheforegoing ,itwouldseemthatthetraditional clients '
(EuropeandJapan)intheworldoilmarketandthenewcomers ,theUnited
States,probablyrequiring aquarteroftheirenergyconsumptionfrom'
importedoil,maynotbeabletotakethesameattitudetothemarket
inthefuture.

-7-
Countries withplannedandcentralized economies willconsumein1985
twoandahalftimesasmuchenergyasin1970>andthestructure of
theirconsumption willprobably undergoimportant changes.
Solidfuelsnowsatisfymorethan55$oftheneed:in1985»thesame
proportion willbecoveredbyall.thehydrocarbon fuels.Thistendency
towardsacloserapproach tothe"industrialized free-market economy"
structure willnevertheless leavea.substantial marginfortheexpansion
ofsolidfuels._ ..
1 ...\
Theincreasing hydrocarbons requirement envisaged forthesecountries
castsdoubtonthegenerally accepted hypothesis oftotalself-sufficiency
forthiseconomic zone.Compelling considerations ofaregional nature
orofeconomicpolicycouldinclinethesecountries towardsgreater
participation inworldenergymarkets. .■-
Theconsumption ofenergyinthedeveloping countries willprobably
trebleduringtheperiod 1970-85 »butshouldstillbelessthan
one-eighth ofworldenergyneeds.
Fundamental structural -differences existamongthe.developing countries
asawhole,fromonezoneor.onecountrytoanother,relativetothe
degreeofeconomic development andtoenergyneedsandresources o£the
lackofthem.Theincreaseinenergyneedswillnot,therefore ,be
ofauniformnatureinalldeveloping oountries and-ineachcasethe
rateofincreasewillbe.determined inlargemeasures bytheexpansion
orotherwise of.thedevelopment oftheeconomy.
Although someofthecountries inquestion possessthegreaterpart
oftheworld'senergyresources ,theirownadditional energyneeds,
willhaveonlyaminoreffectonavailability ofenergyintheworld
marketfromnowto1985.

Inspite ofthehigher rate ofincrease ofenergy needs inthe
developing countries ,themargin which separates them from the
industrialized countries ismost unlikely tonarrow toany great
extent .In19851 "theaverage consumption ofenergy perhead of
population should be10,900 kgceintheindustrialized countries ,
3,300 kgceincountries with planned economies ,and700kgcein
developing countries .Thus more than half theworld 'spopulation
will beusing only one-tenth oftheavailable energy .
Whatever theuncertainties surrounding thedevelopment ofenergy
demand incertain countries orincertain types ofcountries ,and
without understating therole oftheother energy sources ,itis
clear that theproblems ofworld energy supply during thenext
fifteen years will essentially concern hydrocarbon fuels ,which
have tocover two-thirds ofthe total needs .
1C.The Coramunity's energy needs
Any estimate offuture energy needs must bebased onanassumption
ofeconomic growth .Inthis respect itseems reasonable tocount
onanaverage rate ofgrowth intheCommunity comparable tothat
achieved over thelast 20years -about 5 Essentially ,this
hypothesis isbased ontheprospect ofanimprovement inproductivity ,
which ,particularly inview oftheforeseeable labour supply situation ,
canonly beachieved byanincreased -degree ofmechanization ,which
inturn implies increasing energy consumption .Certainly oneshould
1Doc .XVII/153/72,"Outlook forprimaiy energy demand intheCommunity
1975-80-85"describes themethods bywhich energy demand hasbeen
estimated andgives .detailed ,information foreach sector of
consumption . ,

-9-
notoverlookthepossibility oftechnical advancesbringing about
reductions inthespecific consumption ,offuels.However,apart
fromthefactthatincertainsectors-forexample,conventional
powerstations andblastfurnaces-thepossibilities forimproving
performance aregrowingprogressively less,otherfactorswill
makeforgrowthinenergydemand-forexample,theincreasein
consumption whichmaybeexpectedtoresultfrommeasures toprotect
theenvironment . •f..
Afurtherargument infavouroftheadoption ofagrowthhypothesis
isthatitwouldbeimprudent tobaseenergypolicyoptions onan
assumption ofaslowerrateofeconomic growththaninthepast;
suchaslowing-down would,inpresentconditions ,beofapurely
speculative nature.
Itisinfactalreadycertainthatmorethanhalfoftheenergy
requirement willhavetobecoveredbyimports.Itistherefore
best,whilealwaysbearinginmindthemarginsofuncertainty
whichbesetallestimates offuturedemand,toavoidunderstating .
thequantities ofenergywhichtheCommunity willhavetoobtainin
theworldmarket, ..
Onthesebasesenergydemandshouldbeexpectedtoincreaseby^,2%
ayearonaverage,aslightlylessrapid ,rateofincreasethanwas
observedbetween1960and1970(+6.2$).TheCommunity'stotal
energyneedswouldincreaseinthiswayfrom973millionteein
1970to2,000milliontee(1,400milliontpe)in1985?nine-tenths
ofthiswouldbeforinternalconsumption ^.
ATotalneedsincludeexportsanddeliveries tobunkersaswellas
internal consumption.' Theestimates fortheseadditional items,
about185milliontee(130milliontpe),aresubjecttoagreater
degreeofuncertainty thantheestimates ofinternalconsumption .
Itisnevertheless desirable totakethemintoaccountinorderto
obtainanideaofthetotalquantities necessary fortheinternal
workingofaneconomicentityandforthemaintenance ofitsexternal
relations .

-10
Theseforecasts shouldbeconsidered inalong-term contextsince
theydonottakeaccountoffluctuations inthebusiness trend
T.-hich .willtendtobeapproximately self-cancelling .Forexample,
onemightreasonably supposethattheslackening dfeconomic
activity observed in1971and1972canbecompensated bysubsequent
movements .Thefigureof2,000millionteetherefore represents
theprobable magnitude ofdemandandmakesitpossible tooutline
thesizeandnatureofthemainenergysupply ,problems ofthe
Community ,towards19^3*
Acertainproportion ofenergyneedsmaybecalled"specific"in.
thesensethat,withpresenttechnology andbecauseofthe
limitations andinertiaofinvestment patterns ,theycanonlybe
satisfied byaparticular typeorsourceofenergy.Tothese •
needsshouldalsobeaddedthose'coveredbycertainenergytypes ,
whichareavailable inanycase,whetherbecauseoftechnical
considerations ,becauseofthecommercial conditions ofsupply,
orbecausethedevelopment oftheenergytypesinquestionwill
bebroughtaboutbyexigencies ofatechnological nature.
Theremaining portionofenergyrequirements ,withinwhich
competition amongdifferent energysourcesispossible ,represents
about65/ooftotalneeds.Thusin19^5i1,100-1,200 milliontee
(770-840milliontpe)wouldrepresentthequantityofCommunity
deinandforwhichcompetition couldtakeplaceandalsotheprincipal
potential sphereofinfluence forpolicy.Thisisreally,however,
amaximumfigurebecause,evenforthissectionofdemand,there
arefactorsofinertiawhichmilitateagainstcompletefluidity of
themarket.

-11-
Competition amongsubstitutable energysourceswillbein
conditions different fromthoseexperienced intherecentpast,
becausethechoicecriteriaappliedbyconsumers ,individually
andcollectively ,willtendtochange.Thetv;otraditional
criteriaofqualityandpricewillcontinuetoexercise a
decisive influence butmaybecomebroaderinscope.
Totheconceptofintrinsic qualityoftheproductandofthe
servicewhichitprovideswillbeaddedthatofitseffectson
theenvironment ,andthecriterion ofthelowestpossibleprice
willalsobeincreasingly seeninthesamecontext.Moreover ,
thefuturecommercial conditions ofenergysupplyandnew
requirements fortheprotection oftheenvironment willadd
urgencytothenecessity ofusingenergyinasrational away
aspossible.Lastly,as"FirstOutlines ""havealreadyemphasized ,
equalweightmustbeattachedtosecurityofsupplyasanobjective
closelyboundupwiththatoflowcost.

-12-
CKAPTER 2
*PROSPECTS FORMLRGYAVAILABIL ITY ■*
I'-' """ \
Whileitispossibletosketchtheoutlines'offutureenergydemand ,
intheComnunity ,itismostdifficult tostudythecommercial
conditions whichwillapplytoenergysupply.' Apartfromthe
evolution oftechnical andeconomicfactors,political situations
whicharedifficult toforeseemayalsoaffecttheconditions of
supply. .
/ .<■
Thepresentstudyislimitedtothemainsupplytendencies forthe
energytypeswhichcancompeteinmeetingtheneeds,described as
"substitutable ":oil,naturalgas,coalendnuclearenergy.
Thesearealsotheenergysourceswhosesupplyproblems mustbe
examined inaworld-wide context .
A.011.1 ...,;.. •
Theextensive worldreserves of.oilare.generally .considered tobe
sufficient tocoverdemanduntilnuclear !powerisabletotakeover
completely fromfossilfuels.However,ntuchuncertainty surrounds
theconditions underwhichoilwillbenla.deAvailable toconsumers ,
particularly intheCommunity ,whichwilldependonimportsfor95%
J '1ofitscrudeoilrequirements ,.Evenif,infutureartincreasing
proportion ,of-these -imports -comesfromsputceswhicharerelatively
closeathand(NorthSea),theCommunity ;willstilldependonremote
.supplysourcesforthegreater'partofitsnefeds'.
In1970and1971pronounced changestookplaceintheoilmarket.The
pressure onbothdemandforcrudeandthefreightmarketcreated
''•conditions favourable tosubstantial priceincreases .Thescopeof
theseincreases shouldnot,however,beexaggerated inthosecases
1Foramoredetailed surveysee"Medium-term forecasts and.guidelines
fortheoilsector".

-13-
w.aercthoirpurpose wastocompensate formonetary depreciation and
theerosionoftheproducing countries' income.Theagreements
recently concluded betweentheproducing countries andthemajoroil
companies makeitpossible toforecast withsomedegreeofprecision
thecommercial conditions ofcrudeoilsuppljrupto1975*
1Theaveragedelivered costofaNorthAfricancrudeincreased from
$1l/tonneatthebeginningof1970to$l8/tonneattheendof1971.
Thisincrease stemssolelyfromtheapplication ofnew-taxliabilities ,
$7/"tonnemorefortheMediterranean basinand$3.5AonneforthePersian
Gulf.Upto1975,ejectedincreases should,takingintoaccountthe
recentdevaluation oftheUSdollar,amountto$3/tonneforMediterranean
and$2.5/tonneforMiddleEastcrude.Thesecostincreaseswillbe
reflected .inprices,particularly oflightandheavyfueloilwhichare•
pricereference pointsforotherformsofenergy.Heavyfueloilis
generally quoted$3~4/tonnebelowthecrudeprice.
Trendofsup-plycostofaSaudi-Arabian crude1970-75 (example)
S/tonne
Before
Teheran-TripoliAfter
Teheran-Tripoli1975
Produced costincluding
leviesandtaxes 37.5/t .*11/t C13.5A
Transport toRotterdam
andcompanies' profits $9.3A $9.3A $9-3A
Total!' –
|$17A •
(#12Ace)$20/t■
($14/tce)$23A
(^1ôAce)
Asfarastransport costsareconcerned ,medium-term prospects are
relatively favourable ;solongasavailable capacity exceedsdemand,only
modestincreases maybeexpected .Inthelongerterm,itisdifficult to
Ι·>·1<»Γ·»·1·»>.Μ>Ι·,··ΙΙ |·ιι·ι· ·Ι1Ι·!|Μ
1Excluding companies' profitmargins.
2Genèvaagreement ,February 1972,

-14-
predicttheconditions whichwillapplytothetransportation ofthe
.3»000milliontonnesofoilwhichwillheexported .in19^5}thereis
noreason,however ,toexpectsubstantial increases infreightrates
whileeconomies ofscalecanstillbeachieved ,
Nevertheless ,beyond1975uncertainty surrounds manyofthefactors
affecting oilcosts,andanumberofpotentially inflationary elements
canbediscerned :
i ■
-thedevelopment ofhigher-product ion-co3tdeposits •couldleadtq
eventual costincreases ; ■ r
-thepolicyofproducing countries ,whichformanyyearswasaimedat
increasing profitbyincreasing thevolumeofsales,mayinsome
casesshiftthemainemphasistoincreasing proceeds'perunit.The
i .•
producing counties areexercising agrowingdegreeofcontrolover
theirpetroleum resource^,eitherdirectlyorby;fiscalmeasures ,in
ordertoexertanupwardpressure onprices,particularly inviewof
thestrengthening worlddemand;
-thequantities ofoilavailable arecloselylinkedtotheflow'of
investment fluidstoexploration ,whichcanonlyintensify asdemand
increases ,Whetherwithinthepresentbusinessstructure orinthe
context ;ofgreaterparticipation byproducing countries ,themaintenance
oflow-costdiversified oilresources depends onthemaintenance of
sufficient investment capability .
, . ■ '
Otherfactorscouldt^ndtobalancetheeffectofthosementioned above:,
-theinterests ofthevariousproducing regionswillnotnecessarily
coincide ;economicorothernecessities peculiar tosomeofthemcould
contribute tothemaintenance ofadegreeofcompetition betweencrudes
ofdifferent origins ;
-diversification ofsupplysourceswillreducetheimportance ofcertain
producing regions.Promthispointofviewthediscovery ofnew
•t»
resources ,including theITorthSeafields,'willattractparticular
attention .

-15-
Theknownresources intheLTorthSeadonotjustifythehopethatthey
mightrakeamajorcontribution totheneedsoftheCommunity ofSix.
Intheenlarged Community ,however,the;'-willhaveafavourable effect
onthebalanceofoilimports.Inanycase,theywilltendtoreduce
thedemandonotherproducing regions.
InthisrespectitshouldbenotedthatJapan,liketheCommunity ,
dependsentirely onimportsforheroilrequirements ,whichcouldreach
500-600milliontonnesin1935.TheUnitedStates,untilrecently
self-sufficient ,willimportincreasing quantities ofoil,andsome
forecasts puttheimported proportion ofUSconsumption at3O-5O/0from
1980onwards.ItistheMiddleEast,theprincipal presentandfuture
supplieroftheCommunity ,which"illalsobecalledupontosupplya
largeproportion oftheneedsofthoseothertwozonesofconsumption .
Thesevariouscontradictory factorsarosufficient indication ofthe
long-term uncertainties attaching tothecostofcrudeoilsupplies .
BNatjmlgas
1
Ifnaturalgaswereavailable insufficient quantitiesitcouldcover
almostone-third ofenergyneeds.However,fromtheknownreserves m
theterritory oftheCommunity orontheContinental Shelf,availability
32in1985cannotbeexpectedtoexceed240,000million m.
Increasing quantities ofgaswillhavetobeimportedinexcessof
indigenous availability tomeetdemand.Onpresentinformation these
importscouldreach23,000million ayearbefore1980.
naturalgasisarelatively rareformofenergywhichcostslesstoproduce
thancrudeoil;itspricetendstocomeintolinewiththoseofoil
products whichitcanreplace (principally mediumandlightfueloils).
1See"Mediun-term forecasts andguidelines forCommunity gassupplies".
2 ^At8,400kcalperm.

-16-
Eigeneral,free-at-frontierpricesofimported gasarehigherthanthose
ofindigenous gas.Thisappliesparticularly toliquified gas,which
needqahighdegreeofsupporting "capital ;investment andinvolvesa
complextechnology .Transportation bypipelineissimpler "butalso
requires largeamountsofcapital.
Asanindication ,pricesinlong-term contracts wereasfollowsin1970
(inZpertee): ^
~;Dutchgas.(freéatfrontier)' 9»1/11*2
-NorthAfricangas(cifplusregnsificat ion) 11.9/14
USSRgas(freeatfrontier) • 9*8/11.6.
TheoutlookforCommunity production beyond1980dependsonthesizeof
anynewdiscoveries whicharemade,particularly ontheContinental Shelf,
, . * 1
Sofarasimportsareconcerned ,theconsiderable reservesinNorthAfrica,
theUSSRandtheMiddleEastofferpossibilities formajorexpansion .
Theinternational naturalgasmarketdoesnotescapetheeffectsofsome
ofthedifficulties whichaffecttheoilmarket,dueinparticular tothe
increasing demandtrendswhichareemerging.Asinthecaseofoil,
JapanandtheUnitedStateswillbeseekingtobuygasfromsomeofthe
mainpotential suppliers -.oftheComifcunity .
Alreadyarisingtrendinnatural >gaspricescanbeobserved .ForDutch
.gas,representing .overhalfof'the.Community'sinternalproduction ,the
pricelinkwithfueloilhas-recently beenreinforced ;Themostrecent
contracts forAlgerian LUG,'covering gasdeliveries starting "between1975
and1980,havebeenconcluded atfobpriceswhich,areaboutone-third
abovepresentlevels.Takingintoaccounttheincreasing costsofmethane
tankers,thedelivered priceisthusincreased by$2.8-4.9pertee.'

-17-
Thesepricesarecomparable tothe1975oilpricelevelswhichwill
resultfromtheTeheranandTripoliagreements .
Inpresentcircumstances thereisthuseveryreasontobelievethat
pricesofnaturalgaswillcontinue tobeinfluenced bythoseofthe
oilproducts whichitcanreplace ..Onecannotruleoutthepossibility
of.naturalgaspricesbeingforcedabovethisparityifdemandshould
significantly exceedavailability ..
C»Coal
Thecontraction ofCommunity coalproduction willnodoubtbeata
slowerratethanthatwhichwouldbedictated bytheunderlying
economics ofsupplyalone}itwillbemainlydetermined bythepolitical
decisions whicharetakenonproduction ,,
Takingintoaccountcokingcoalrequirements andthedeclineinthe
consumption ofste?mcoal,andonthebasisofpresentpricelevels
,(averagerevenueofthecoalindustryin1971sapp.$20pertee;price
offueloilnetoftax:$12-14pertee),thehypothesis canbeadvanced
thatcoalproduction in1985willnotsignificantly exceed100milliontonnes.
Thishypothesis isbasedonprospects ofrationalization andproductivity
improvements ontheonehandandincreasing costsontheother,these
factorstendingtoneutralize eachother.
TheCommunity coalindustry wouldinthefirstinstance ensurethe
1satisfaction ofcokingcoalrequirements .Quantities ofsteamcoal
produced alongside thisproductcouldbesoldtopowerstationsifthey
wereofferedatcompetitive pricesandassumingtheavailability ofthe
/necessary coal-fired ordual-fired capacity .1Onthispointitshould
benotedthattheCommunity coal'scontribution totheflexibility of
1Cokingcoalisaspecialcasetotheextentthatitcoversspecific
requirements outsidethefieldofcompetition amongenergytypes ,
Thecommercial conditions forimportsaretherefore notdealtwithhere.

–18-
powerstationsupplypatterns £Blimitedbythestructure oftheequipment .
Takingintoaccountthedecisiveroleoffueloilprices,coalimported
atsimilarpricelevelscouldplayanincreasing partincovering power
stationrequirements .Thiscouldhappenprovidedthatimported coal
meetsthequalitycriteria whichwillresultfromtheneedtoprotect
theenvironment ,andthatsufficient pricestabilityisofferedto
compensate fordiminished' flexibility ofutilization .
However,thepossibility ofincreased importsofsteamcoalactingasa
priceregulator 'should ;notbeoverstated .Evenifin'certaincases
favourable production andtransportation costssecureacompetitive
positionfor,st^axjicoalintheCommunity*s coastalpowerstations,the
priceofoil'per .calorieremainstheruleforfixingthepriceof
imported coaloNevertheless ,shouldthedelivered priceofimported
coalfallbelowthepriceoffuel,oiltotheconsumer -,the-formerwill
havea.restraining influence ,onthelatter. >
Worldtradeinsteamcoalhasuntilnowbeenrelatively limited,butwill
tendtoincrease because .oftheexploitation ofhewreserves ,notably
inAustralia ,Canada,;SouthAfricaand.Poland.Theexpansion of'
supplies dependsonthe.creation ofminieg,landtransport andport
capacities .Itisdifficult togiveanyindications concerning the
pricesatwhichthesecoalsmightbe-offered , ■''
Thevolumeofworldcoalreserves .mightmakeitpossible toobtain
largerquantities ofimported steamcoalthanthe30-40 ,milliontee
whichrepresent areasonable hypothesis for However,,asignificant
increaseinsteamcoalimportscouldnotbeattained withoutprice
increases .Moreover ,if9,.higherlevelofimportswererequiredin
1935thenecessary actionwouldhavetobetakenatrelatively short
notice. ....

-19-
1Nuclear Energy .
Nuclearenergycanreducethedependence oftheCommunity onimported
fossilfuels,particularly oil.Itisthusnotonlyadiversification
factorcapableofincreasing security ofenergysupply;itcanalso
exertpressure onthepricesofcompeting energytypessinceitwill
henceforth always,attheloaddiagrrunbase,bethecheapest meanspf
generating electricity .
Promthepointofviewofsecurityofsupplyuroniumhas'certain
advantages inthatitcanbetreatedasanindigenous energysource,
although Community reserves ,whilenotnegligible ,arescarcely
extensive .Uraniumreserves are'widelydistributed throughout the
world;deposits areabundant andgenerally locatedinregionswhere
continuity ofsupplyissufficiently assured .Uranium'senergy
potential perunitofweightisconsiderable ,reducingtransport
problems andcostsandfacilitating storage *
Atpresent,worldavailability ofnaturaluraniumfarexceedsdemand,
andbetween nowand1985thereshouldbenoprobleminobtaining'
suppliessufficient forCommunity requirements .
TheCommunity isatpresententirely dependent onimports ,andin
practice onasinglesource,foritssupplies ofenriched uranium/.
Although theshort-term availability prospects aresatisfactory ,this
willnotapplybeyondthepresentdecade.Acomparison ofcumulative
,worldrequirements withthecumulative production fromenrichment ,
».plantsnowworkingorplanned-mainlyinNorthAmerica-showsthat
afteraperiodaround1980production willbeinsufficient tomeetdemand.
Asolution tothisproblemwillhavetobefoundbefore1974sothat
utilities orderingnuclearpowerstationsforthe'"timeinquestion can
beassuredofsufficient fuelsupplies .Thecreation ofanenrichment
1See"Secondillustrative nuoreai^.programme .

-20-
capacity withintheCommunity wouldmakeafundamental contribution to
achieving theobjectives envisaged fornuclearproduction ,andwould
allowCommunity industrytocarryonallactivities associated withthe
fuelcycle.
Untilabout1980suppliesofplutonium willbelimited,butthereafter
progressively ,largerquantities willbeobtainable ,whichcouldbere­
cycledinlight-water reactors andreducetherequirement for,enriched
uranium,providedthatnon-member countrieswithenergyshortages donot
bidforCommunity plutonium snddivertitfromthisapplication .
Electricity canalreadybeproduced fromnuclearenergyatalowercost
thanfromaconventional thermalstationworkingincomparable conditions .
Unlikeelectricity generated fromfossilfuels,however,mostofthe
costofnuclearelectricity isduetocapitalinvestment .Inthe
longerterm,theexperience acquired byEuropean construction concerns
shouldbringaboutarelativereduction incapitalcosts;however,if
thereduction istobesignificant ,itisnecessary toachievebotha
greaterdegreeofstandardization intherangeofreactortypesoffered,
andtospreadtheordersforeachtypemore,sincetheeffectsofseries
production areenhanced bywidening themarket
Investment decisions talcenuptothepresenttimehavedetermined the
nuclearcapacity whichwillbeinservicetowards 1977ifallthe
stations whichhavebeenplannedaresetupandworkingatthattime.
Thereafter ,thescaleofapplication ofnuclearenergyshould .
increasetoalevelof130GWein1985>Talcingintoaccountthe
stations whichwillbeoperational by1977•atotalof150GWecould
Thisscaleofapplication corresponds totheincrease inthetotal
numberofpowerstations whicharetermed"competitive ",ie.tfor
whichinvestment choicesarebasedonthecosts(including investment )
ofthedifferent energytypesavailable .Excluded fromthis"competitive "
rangearehydroelectric stations,"peak-lopping "stations andstationsusingfuelswithspecialcharacteristics (lignite,derivedgases,etc.)*

-21
therefore bebasedonnuclearcapacityin1985 >
Inviewoftheforseeable patternofdevelopment ,thesecond
illustrative programme hassetatargetofaminimuminstalled
capacity of10.0GWeby1985-'
TheCommunity 1sindustrial capacityissuchthatthisamountcanbe
considerably exceeded ,sinceevenatthisstagethecomponents
manufacturers' production capacityisfarfrombeingabsorbedo A
marginofflexibility therefore existswhichwouldpermitthe
industry torespondtoanyspeeding-up ofthenuclearplant
construction programme , >

CHAPTER 3
'<'''' ■' : •*
PROBLEME OFENERGY POLICY >''' :-,-
A.,-Structure ofdemand
TheprospectB for"thedevelopment ofdemandasdescribed inChapter 1
suggestapatternforthefuturedivision ofthemarketbetweenthe
different kindsofprimaryenergy.Thispatternappearslikolyin
viewof.the.structural changeswhichwilltakeplaceinthemainsectors
ofconsumption .Itisbasedontheassumption thatthelowestaverage
costwillbe.soughtinthecompetitive sector,havingregardtothe
rigidities andrestrictions affecting certainsectorsofdemsnd .Itis
alsoassumedthattherelationships betweenthepricesofthedifferent
competing formsofenergywillnotchangeradically fromwhattheyare
atpresent .-
In1985,totalneeds(2,000milliontee)willbemetasfollows:
2%bylignite,7$bycoal,11$byelectricity ,15$bynaturalgasand
65#"byoil. • ' ''r
"••*'Breakdown ofdemandbysourceofenergy(1970-85)
Actuals 1970 Prospects 1985
*000,000 $'000,000 *000,000 1°I*000:000
I.tee tpe [tee
I ;tpo
Coal m -20.•139 137 ■.7 96
[Lignite '■■'34•3 24-■ -37 2 26
Naturalgas -73 ••8". 51 -295,.15 ,207
Hydroelectric energy 46;-5: 32 -■47■.2 33
îluclearenergy 4' :175•)9,123
Oil '•-617-'"1-64'v.432 3304 =■:M ■•912
TOTALNEEDS !973 i100 631 1995'100 1397
T
jThedemandforenergyforpurposesotherthanelectricity generation and
asasourcematerialwillriseto155millionteeiii1985&nclis-
mcluded intotalenergyneeds.

-23-
Aconservative estimate oftherelativeposition ofindigenous fuelin
thisset-upsuggeststhattheCommunity'sdegreeofdependence on
energysupplieswillcontinue toriseoverthenexttenyearsandwill
haveincreased from67%in1970to70%in1980.Nochangein-this
trendcanhehopedforuntilaround1985»when,throughtheattainment
ofthetargetsetfornuclearenergybythe"SecondIllustrative
Programme",thedegreeofdependence maybegintodiminish .
Whilestressmustbelaidontherisksinherentindepending onexternal
sourcesforenergysupplies ,autarchy mustberuledoutasanobjective
forenergypolicy.Forenergy,asforallotherformsofeconomic
activity ,theCommunity canonlyplanitspoliciesintermsofan
expansion ofinternational trade -.Theonlyrestrictions thatcanbe
imposedonthispolicyarethosedictated byconsiderations of
security,necessitated toagreateroralesserextentbyexternal
circumstances asobserved atthepresenttime.
B.Oil:thekeyelementinsupplies
Eveninthefieldinwhichdifferent sourcesofenergyarecompeting ,
themarkethasonlylimitedflexibility .Thelabourforceandthe
equipment inuse"ineachenergySectorimposelimitsontheshorti.term "-"
changesthatcanbemade.
Thischaracteristic seemslikelytopersistintheforeseeable future.
Anincreaseinthecostofoilsupplies ,willnot,therefore ,entaila.
corresponding decreasein;consumption and,whatever happens,this
sourceofenergywillprobablystillhavetomeetmorethanhalfthe
totalenergyneedsbetweennowand1985a*1*!at900milliontonsof
crudeoil(65%oftotalenergyrequirements )willstillbethe
mostprominent featureofenergysuppliestotheCommunity
"atthat"dato. " '" ,
Allthesame,itshouldbeemphasized that,inspite -ofthe-■-?-
considerable increaseinthevolumeofdemand,thissituation will

•p.24
itselfconstitute animprovement ,oratleastalevelling-out ,in
comparison withthesituation inthenextfivetotenyears,whichlooks
likebeingaperiodwhichwillhaveto"beweathered beforetheCommunity
cangradually breakfree;-fromitsexcessive dependence onimported
oil.Thisstabilization willbebased,firstlyonoilsupplies
from"reliable"areas,andthenontherelative amountofnatural
gasproduced withintheCommunity orimported fromnon-member
countries .Theseimports,whilst -'notreducing dependence onoutside
sources,willhavetheadvantage ofspreading therisksinvolved ..
Theotherfactorofstabilization willb®'nuclearenergy,whichwill
notstarttomakeitsweightfeltuntilafter1980.
FortheCommunity ,-therefore ,thebasicenergypolicyquestiontobe
solvedbetween now'and1985isthatofcomingthroughthisperiodof
transition ,i.6.,obtaining -itssuppliesofoilonthebest-jerms
possible ,sinceinanyeventoilwill'haveto-coverthegreaterpart •
oftheCommunity'senergy'needs- •
Thus,withoutminimizing theimportance ofparticular problemsinthe•
otherfieldsofenergy,orofthepolicies aocessary tosolvethese
problems ,-itseemsclearthatoilpolicyisthekeyissueasregards
energypdlicyintheCommunity .In-thefollowing pagestheproblems '
relating toothersourcesof-energywilltherefore onlybeconsidered
totheextentthattheyhaveabearingontheoilquestion .
C.Twopossible linesofdevelopment intheoilmarket
Inviewoftheuncertainties affecting oilsupplyconditions ,
consideration mustbegiventothesituations towhichdifferent
Ipatterns ofdevelopment maylead.*Themanyhypotheses thatcanbe
builtuponthebasisofthefactorsatworkcanbereducedin
practical terms "totwocasesjonohe'hand,astablemarketwitha
certainsurplusofavailabilities and,ontheotherhand,a;marketin

-25-
whichpriceswillriseappreciably assupplies "becomeshort.
1.Firstcase:astablemarket
Thefirstcasetobeconsidered isthatinwhichcompetition continues
betweenoilfromdifferent sourcesasatpresent .Thepriceofoil
wouldfollowapproximately thessunelinesasthegeneral movement of
worldprices,withadjustments ,wherenecessary ,toincreases incosts
andallowance fortherelativedepreciation oftheroyalties aidtaxes
leviedbytheproduoer countries .
Inthesecircumstances thepriceofcrudeoilin1985couldbein
linewiththetrendtriggered offby1;heTeheranandTripoliagreements .
Inviewoftheforeseeable increases incosts,therelationship between
thepricesofotherformsofenergyandthoseofcompeting oilproducts
wouldbeofthesameorderastheyareatpresent andoilwould
maintainitsroleasaguidetoaverageenergyprices.
Demandwouldbreakdowninaccordance withtheschemeshownabove,
whichinparticular wouldleadtotheachievement ofthenuclear
energytargetof100GWeinstalled capacityin19^5>"thepersistence of
acertaincontraction intheCommunity coalindustry-whichnevertheless
wouldbeunabletodowithoutgovernment subsidies –andamoderate
increase inimportsofcoalfromnon-member countries .The
exploitation ofpresent knownreserves ofnaturalgasintheCommunity
wouldhavelevelledoffandtheonlyimportswouldbethoseunder
contracts anddeclarations ofintentwhichhavebeenconcluded atthe
timeofwriting .
\
Ithasbeensuggested abovethatoilwouldretainitsleadingpartin
determining thelevelofpricesofcompetitive formsofenergy,which
wouldshowvariations fromthepriceofoilofthesameorderthattheydo
now.Thegeneralschemeofpriceswouldtherefore followthesame
patternasoil,namelyoneofmoderateincreases .However,ifone

-26-
takes theprice ofoilasaconstant morder tocalculate theaverage
supply cost itseems that theprice structure in1985 might bemore
favourable than in1970 ,through adecline intheproportion ofcoal
andthe <increasing importance ofnuclear energy ,
2.Second case :large increases inoilprices
Another possibility isoneinwhich factors making forrigidities
intheavailability ofoilsupplies become preponderant ,leading to
sharper price rises ,,This would bethecase ,forexample ;,if
production were deliberately restricted orifinvestment inoil
prospecting were notmaintained atanadequate level .
Such anescalation inprices could profoundly nodify thestructure of-
energy demand intheCommunity ifitreached thestage ofchanging the
relationship between i;he .price ofoilandthecosts ofcompeting forms
ofenergy :
\
(a)attheworst ,oilconsumption would beconcentrated mainly on
specific uses ,i.e. -,formotor fuel andforcertain applications as
erawmaterial .Consumption ofliquid fuels would belimited
roughly totheamount inevitably produced asaby-product of
refining theoilused for such specific purposes .Thevolume and
structure ofdemand forcrude oilwould therefore beappreciably
different from thefirst case wediscussed ;
(b)prospects -forthedevelopment of -nuclear energy would bemore
favourable .Itmight meet alarger proportion ofelectricity demand
andeven beextended toother uses ;
(c):some reserves ofnatural gasintheCommunity which are .atpresent
considered not commercially exploitable might become exploitable
andthesearch forhydrocarbons intheCommunity (including thenew
member states 1territories andtheContinental Shelf )would be
stimulated .Imports ofgasfrom non-member countries might reach

-27-
averyhighlevel$evennaturalgaslocated ,inremoteregionswould
havealowerdelivered pricethantheoilreference price;
(d)thecompetitiveness oftheCommunity Coalindustrywouldbe
improved ,andtheadditional revenuewhiohitwouldobtainwould
makeatleastpart,ifnot.all,^production ...aridsalessubsidies -,
unnecessary butwouldnotlistenitschargesincurredinthe
past,Inthiscontextproduction wouldnotbemuchmorethan •
100milliontons,butitwouldremaintobeseenwhetherinevitable
increases intheoostsofproduction wouldnotcanceloutthe
increases inrevenue .Inanycaseacoaloutputofthesameorder
asatpresentcouldnotbemaintained withoutsubsidizing a
proportion ofcoalproduction ;
(c)demandforcoalfromnon-member countries couldexpandmarkedly *
Accountmustbetakenoftherelatively longperiodrequiredfor
suppliestobecomeavailable andofthepriceincreases which
wouldbeboundtoresult,particularly inasituation inwhichthe
newaspectoftheoilmarketmightgive,risetoaworldshortage '■
ofenergy. ■■■
Therearelimits,however,topossibleincreases inthepriceof
oil. ■ '
Ontheonehand,llorthAmericapossesses substantial reservesof
bituminous shalesandsandsfromwhichconsiderable quantities of
oilcouldbeobtained .Thecostofexploiting theseshalesandsands
isabouttwice(pertonofoilproduced )thepresentpriceof
MiddleEast,crudedelivered US.;Thisfiguresetsacoilingwhichoil
pricescouldnotexceed,atleastforthatelementofconsumption
where -thereisnosubstitute foroil,i.e.,motorfuelsandthe
minimumquantityofproducts involvedinrefining .

-28-
Furthermore ,thepossibility ofrecoursetoimportsofsteamcoalsets
anotherlimittorisesinoilprices .Steamcoalisalreadyavailable
insomeCommunity countries atpriceslowerthanthoseoffueloil,
including taxes.
These 1twopdtential competitors (oilfromshaleandsands,andsteam
ooal)wouldnothaveanimmediate restraining effectontherisein
oilprices.Timewouldberequiredtomaketheinvestments neededto
createanadequate supply-
l
Butifthepossibility ofasharpincreaseinoilpriceslinkedwith
diminished flexibility ofsupplyweretobecomereal,itiscertainthat
oirconsumption wouldrapidlyceasetoexpandandmightevendecrease
toalargeextentafterafewyearsaslargeconsumers changedto
othersourcesofenergy.Suchadevelopment wouldnotbeinthe
interests ofeithertheconsuming ortheproducing countries .The
formerwouldbeobligedtopaymoreforenergythattheycannotdo
without.Thelatterwouldrisklosingalargepartoftheirmarket
andthusdepriving themselves ,perhapsoncoandfotf'all,ofthe
financial resources theymostneedtolaunchtheireconomic development .
D.Restrictions' on'security ofsupply
Evenifthesecondpossibility considered hassomeexaggerated characteristics ,
itunderlines therisksinherentinchangesthataretalkingplaceia.
thestructure oftheworldoilmarket.Ifcompetition betweenoil
fromdifferent sourceswerenolongertobepossible,powerful
disturbances couldaffectthewholeenergymarket,ifnottheworldeconomy ,
Theroaregoodreasonsforhopingthatthesestructural changeswill
takeplaceinanordered waywithoutentailing suchseriousconsequences ,
Buttherearereasonsforconcernuntilagenuinelong-tern stability is

-29-
achieved ,becausethechangesthataare talcingplaceinvolvethedanger
oftensionsinvaryingdegreesthatnightevenresultinthetemporary
interruption ofsomesupplies .Someoforalltheoilsuppliers
mightbetemptedbyeconomic conditions tomakeandinforcefreshdemands .
V«'earetherefore confronted withtwoaspectsoftheproblempresented
bysecurity ofsupply,asregardsnotonlyoilbutalsootherformsof
imported energy .
Ontheonehand,withamarketlessflexible thaninthepast,efforts
mustbemadetoinvestitwithmoreflexibility soastoensure
long-term supplyconditions whicharefavourable fromthepointofviewof
.bothpriceandstability whilepayingdueregardtothelegitimate
interests ofthecountries possessing theresources tokindlethe
demandoItistherefore necessary toactinsuchawaythatin
1985thesituation willresemble ascloselyaspossible thefirst
caseexaminedinthepreceding paragraph (C1.),
Furthermore ,itisnecessary toguarantee regularandsufficient
supplies whatever thestructure ofthemarket .Variousmeasures can
boputinhandtoreducetheriskofinterruptions insupplyorto
limittheireffects:diversification ofsourcesofsupply,the
creation ofemergency stocks',keepingreserves ofproduction and
transportfacilities ,etc.Arrangements needtobemadeonthese
lineswhichwilloperatepermanently aslongasthemarketisseen
nottobesufficiently stable.Thee:q>ensesinvolved mustbeconsidered
asapartofthecostsofimported energyandmustbeadjustedin
proportion totherisksinvolved .

-30-
CHAPTER4
ŒHEJEANS0PACTION
Long-term security ofsupplycould "boimproved byvarious means,among
whichpolicychoiceswillhavetobomade,
-Underanycircumstances ,morerationalutilization ofonerg/would
makeitpossible toreducedemandandthusavoidaccentuating the
pressure onthemarketwhichwillresultfromthegrowthinworld
needs.However,forseveralcategories ofuse,technical constraints
severelylimittheimprovements whichcanbemade,Moreover ,there
istheproblemofdeciding whatmeasures can"betakentoencourage
mororational useofenergywithoutimpeding theconsumer's
abilitytoobtainthefuelwhichbestsuitshisownneeds.
-Primaryenergystockpiling notonlyprovides aremedyforthe
directeffectsoftemporary interruptions inpetroleum supply,but
canalso,toacertainextent,contribute toalonger-term easingof
thesituation ,,Theexistence ofsubstantial stockswouldmakeit
possible,forex-mple ;;toacceptdeliverately andforafairly
longperiodtheseverance ofoertainchannels ofsupplyintheevent
ofhighlydisadvantageous priceconditions suddenly beingattached
tothem,Theunderground storageofafurthermonth'sconsumption
wouldcost$0.2-0.3portonneofoilconsumed,afairlymodest
costcompared withthepriceincreases whichcouldbeexpected ,
However,sometinewouldelapsebeforestockscouldbebuiltup
appreciably abovethe90days'consumption objective whichthe
Commission proposesfor1975Tpartlybecauseofthesubstantial
investment required andpartlybecauseoftheneedtotrytoobtain
thenecessary quantities ofoilunderfavourable conditions .

-31-
-Thediversification ofsourcesofsupplyincreases "bothshort-and
long-tern security ,theformer "byincreasing thenumberofoptions
available ,thelatter "byreducing thedcngerthatindividual
producers mightsucceedindominating themarket .
Inthiscontext,NorthSeaoilproduction ,althoughrelatively modest
onpresentinformation (.100-150milliontonnesayeartowards19^5)
willappreciably increasetheproportion of"reliable"oilwithin
'thetotalsupplies .
–■ThelevelofCommunity coalproduction for"thermal"applications
willdependessentially ontheextentofwhichsupportisprovided
bypublicauthorities ,talcingintoaccountexpectedincreases in
costs,particularly wages ,,Clearguidelines inthisspherewould
allowconsumers ,andinparticular theelectricity producers ,to
adapttheirplantandfuelsupplypolicies .accordingly .Butshort
ofacompletereversal ofthepricerelationship withthereference
fuel-precisely thesituation whichitissoughttoavoid-iti3not
tobeexpectedthatpresentlevelsofproduction willbemaintained
inthelongterm/Havingregardtoitsspecialcharacteristics ,
coalproduction wouldmakeonlyalimitedcontribution tolong-term
se6urity ofsupplyforpowerstations ,•
-Import'sofsteamcoalhavesofarbeenlimitedinquantity „World
reservesareverylargeandseveral "countries arepotentially ina
positiontoexportcoaltoEurope,buttransport costswillprevent
thesecoalsfrombeingcompetitive withoilandnaturalgas
-Thereisalwaysthepossibility thatthissituation nightchange
withthedevelopment ofnewproduction andtransport equipment inthe
producing countries ,andprovidedthatincreases inproduction and
transport costsdonotmatchtherateatwhichoilpricesrise.

-32-
Withanappropriate policy,theuse01'additional quantities of
imported steamooalinpowerstations wouldreducedemandforoil,
–Community natural ;?asproduction willcertainly contribute toreduce
dependence onoil,butinfutureapolicymoreattunedtoresource
conservation willbecomenecessary and,allotherthingsbeing
equal,onlyalimitedincrease canbeejectedintherateof
extraction fromknownindigenous reserves IJhatcanbeextracted
fromtheNorthSeaismostlylikelytobeusedbythenewmembers
oftheCommunity ,But,lookingfurtherahead,anincreasein
exploration intheCommunity mightperhapsproduceaninpreasein
thecontribution ofnaturalgasfrominternal sources .Large
quantities ofnaturalgasareavailableintheSovietUnion,
llorthAfricaandtheMiddleEast,Community importers have
alreadycontracted supplies fromthefirsttwooftheseregions,which
overthenextfewyearswillalsobesupplying gastoevenmore
distantdestinations ,suchasJapanandtheUnitedStates ,
.Theprocurement ofincreased supplies fromtheseexternal sources
wouldrequireconsidérable capitalinvestirent inprocessing end
transport equipment (liquéfaction installations ,tankers,pipelines ,
etc.). V:r
Replacement ofoilbynaturalgasfromnoiv-member countries would
doubtless notreducedependence onimportedenergy,butitwould
'affordtheadvantage ofgreaterdiversification ofsupplysources
-Thenuclearindustry'sobjective for1985isaninstalled power
stationcapacity of100GWe.Achieving asubstantially higher
figurewouldnguceitpossibletoreduce,asearlyas1930,fueloil
requirements forelectricity production .

~33-
Thisspeeding-up ofthenuclearequipment programme wouldhavean
effectthatwouldsubsequently meananevenmorerapidreduction in
oilrequirements ..
Inanycase,therateofdevelopment ofnuclearenergywilldepend
ontheextenttowhichcertainconditions aresatisfied :
-liberalization ofmarkets,restructuring oftheconstruction
industry andharmonization ofstandards andofconstruction
specifications ;
-speeding theprocedure forauthorizing theconstruction anduse
ofplants;
-reserving sites,strengthening thelinksforthepoolingof
reserves ;
-guarantees ofavailability offuel,particularly enriched
uranium,presentplansforthesupplyofwhicharebased011the
minimumobjective mentioned above.