Britain’s energy transition in the shadow of the 1970s
- February 8, 2024
- Colm Murphy
- Themes: Energy, Geopolitics, Great Britain
As Britain transitions away from fossil fuels, the economic and social strife of the 1970s – as well as the opportunities presented by the discovery of North Sea oil – offer both guidance and warning.
This year, the United Kingdom will vote for a new government. It would be misleading to say that the country is gripped by election fever. Public conversation is dominated by Gaza, Yemen, and a slow-burning scandal involving the Post Office. Britain’s political and media class are, nevertheless, preparing for a long-anticipated contest between Rishi Sunak’s becalmed Conservatives and Keir Starmer’s remodelled Labour Party.
A feature of domestic British political commentary is the tendency for writers to draw historical parallels with UK elections past. There are currently three favoured candidates: first, 1964, when Labour’s Harold Wilson won narrowly against a tired Conservative government; second, 1992, when Labour blew a poll lead built up during Margaret Thatcher’s troubled later years; and third, Tony Blair’s landslide victory in 1997.
These comparisons have their uses, but they all tend towards domestic insularity. Few journalists have turned to the February election of 1974, won by Labour’s Wilson (again) over the Conservatives’ Ted Heath. As some academics have pointed out, the 1974 contest took place during the inflationary fallout from a global energy crisis after war in the Middle East. Given recent events, it is striking that commentators tend to pass it over.
From a perspective informed by both the international political economy of energy and by domestic political history, 1974 offers comparisons to supplement those of 1964, 1992, and 1997. Close attention to 1974 reminds us to take seriously the political implications not only of short-term energy crises, but also of structural shifts in energy regimes. That may be an important insight amid discussions of the ‘green transition’, and if (as the polls suggest) there will be a new government.
The irony was probably not lost on the Conservative chancellor of the exchequer, Anthony Barber, and trade secretary, Peter Walker, as they arrived at the Swiss Alps in January 1974. Fifty years before their trip, the British Empire was tightening its grip on the oilfields of the Middle East. The government had a controlling share in the Anglo-Persian Company, which held a generous concession in what is now Iran and Iraq. The collapse of the Ottoman Empire after the First World War led to further gains, which, as Helen Thompson notes, left ‘London in control of the Persian Gulf from its head to the coastal emirates’. By 1920, Britain controlled 50 per cent of the world’s known oil reserves.
By 1974, Barber and Walker were reduced to collaring the Shah of Iran on the ski slopes to trade desperately for oil. It was an undoubted fall, if not from grace, then definitely from power.
Earlier, in October 1973, Ted Heath had held a private meeting with Eric Drake of British Petroleum (as Anglo-Persian was later renamed) and Frank McFadzean of Shell. Heath demanded that, as ‘British’ companies, they prioritise British oil supplies. As the heads of multinational firms with contracts to honour across the world, Drake and McFadzean refused, to Heath’s fury.
Both meetings were desperate responses to the oil crisis of 1973-4 which has long been seen as one of the pivotal ‘shocks’ that created the world we live in today. It was triggered by the Organisation of Petroleum Exporting Countries (OPEC). This cartel had begun flexing its muscles since the 1960s, increasing prices for what had become the lifeblood of Western society. In 1973 OPEC engineered a quadrupling price spike, partly as punishment for the West’s Cold War-era backing of Israel in the Yom Kippur War between Israel and Arab states. In 2024, after the outbreak of conflict in Ukraine and the Middle East, and the oil and gas price shock of 2022-3, the parallels are evident.
Yet, in British historical imagination, the 1973 boycott is less prominent than one might suspect. Pick up bestselling general histories of 1970s Britain by Andy Beckett or Dominic Sandbrook and the oil shock will feature, though it rarely takes centre stage. As observed in James Marriott and Terry Macalister’s Crude Britannia, the oil industry is normally a ‘submarine’ in British politics: below the surface, out of sight. In contrast, the simultaneous 1973-4 coalminers’ strike is widely seen as a critical juncture in British political and social history. As the historian Jörg Arnold has noted, the coalminer is the ‘key figure’ of British contemporary historical narratives, in ways that the multinational oil salesman, tanker driver and petrol station manager are not.
To understand the politics of 1974, we need to bring the two fossil fuels together. True, the UK was not as directly harmed by the OPEC boycott as some of its allies, such as the US, because it was not as vociferous in its support of Israel. Initially there were queues at petrol stations and the introduction of lower speed limits, but the shortages eased relatively quickly. The government introduced petrol ration books, which are still remembered in popular memory of the crisis, though rationing was never actually implemented. The speed limit gradually increased again after March 1974. After a difficult winter, life went on largely as before for most people. As revisionist historians of the 1970s argue, we should not confuse alarmist rhetoric for actual social breakdown.
Nonetheless, a quadrupling of oil prices was still ‘calamitous’ for the UK’s macroeconomic stability, as Philip Whitehead put it. It hit the country in its ‘two weakest points’: the balance of payments, and import-fuelled inflation. Postwar Britain had long wrestled with a chronic balance of payments constraint, as it experienced increased export competition from (re)industrialising countries in western Europe and East Asia, and as its imperial past left it unusually exposed to currency speculation. Moreover, when the crisis hit, the Conservative government had just undertaken a jarring economic U-turn as unemployment hit a million, unleashing a fiscal expansion and consumption bubble (the infamous ‘Barber Boom’). Inflation was already rising globally, too. As such, when the oil crisis hit, the UK already had an unprecedented £1bn deficit in its current account and was already experiencing higher inflation.
The energy shock was perfectly calibrated to sabotage the government’s corporatist strategy, too. Since the mid-1960s, UK industrial relations had become markedly more confrontational compared to its recent past as well as to its nearest European neighbours, with decentralised shopfloor organisations enabling ‘wildcat’ strikes in key industries, particularly car manufacturing. The previous Labour government had tried, and failed, to solve this problem, when the pioneering minister Barbara Castle and Harold Wilson abandoned their attempt to push through a White Paper on regulating industrial action (ironically named In Place of Strife). The Conservative government was, in 1972-73, exploring a statutory incomes and wages policy, as a way of controlling industrial strife and preventing cost-push (wage-led) inflation. Just as the Yom Kippur War began, Heath’s government finalised ‘Stage Three’ of its policy. This linked wages to inflation, meaning that as inflation skyrocketed, so did wages and wage expectations. By the mid-1970s, the UK had the highest inflation rate of all the developed economies.
Most importantly, oil prices spiked right when the government was negotiating with a powerful and strongly solidaristic trade union in British energy production: the National Union of Mineworkers (NUM), which represented workers in the UK’s historic coalmining industry. While coal was widely understood to be in decline, it was still a significant contributor to the UK’s energy consumption; indeed, power stations were often dual-firing coal and oil. As such, the contraction of oil supply, and dramatic demonstration of the UK’s energy dependence on unpredictable foreign powers, strengthened the bargaining power of the NUM.
The coalminers’ union leader, the cannily effective Joe Gormley, was not slow to take advantage. Stressing that the ‘supplies of cheap oil are gone forever’, he stressed the long-term importance of ‘indigenous energy sources’ – and the workers who toiled to obtain it, who should be compensated accordingly. Four days after the Arab-Israeli war, the NUM rejected the government’s pay deal. In November, the miners punched the bruise by declaring an overtime ban. In February, they rejected a 16.5 per cent nominal pay rise (which broadly mirrored inflation) and declared a strike.
Coming alongside the oil crisis, the 1973-74 coal miners’ strike was a grave threat to the government. They responded by declaring a state of emergency. In December, they announced a three-day working week to preserve coal supplies, further disrupting industry and everyday life. This escalating rhetoric was directly in response to the coalminers’ strike, but it also reflected other, simultaneous crises – for example, the spiralling violence in Northern Ireland. After the February strike was declared, Heath called an emergency general election. He framed it as the ‘Who Governs?’ election, and his campaign as a defence of the parliamentary (Conservative) government against extra-parliamentary vested interests (the miners).
The election was bitterly fought and produced a tight, unstable result. Both Conservatives and Labour lost support to smaller parties, including the Liberals and the Scottish Nationalists. The Conservatives were still the largest party in vote share, but they had shed more votes in important marginal constituencies; Labour thus managed to become the largest party in terms of seats. After some aborted coalition talks between the Conservatives and Liberals, Labour formed a minority administration, with the veteran Harold Wilson becoming prime minister once more. A further election in October to resolve the deadlock slightly solidified Labour’s position and they became the largest party in terms of vote share and seats – but only with a bare majority.
What can we learn by revisiting the 1974 elections today? There are clear potential parallels to draw: the fallout from an inflationary spike, radical right agitation, industrial unrest, geopolitical turmoil. Certainly, Labour’s current polling lead is built partly on the worsening cost of living, exacerbated by Russia’s invasion of Ukraine. The bond market instability that ended Liz Truss’s premiership, and gave Labour a massive lead in the polls, was accelerated partly by her government’s combination of tax cuts with an unlimited energy subsidy for households to mitigate high energy costs. The analogy is, however, far from perfect. For one thing, despite the waves of strikes that have affected the UK’s public and transport sectors in the 2020s, the trade unions were much more powerful in the 1970s, and, unlike today, the key strike took place in the pivotal energy sector. For another, Labour’s lead is far greater in the polls today than it was then.
There is one more feature of the 1974 parallel, however, that could well be suggestive of the future. One of the most interesting things about the 1974 election is that, underneath the short-term chaos of the oil crisis and coal strike, a deeper structural shift was transforming the political economy of energy in the UK.
A crucial context here is the concurrent discoveries of vast reserves of oil in the North Sea. In the 1960s, multinational companies were already exploiting gas and prospecting oil just off Scotland’s shore. A major turning point came in 1970, though, when British Petroleum uncovered extensive reserves in ‘Forties Field’, with further discoveries to follow.
A trove of black gold, North Sea oil was a powerful contingency that marked the UK out from other developed countries, especially in western Europe. The implications of these discoveries were not immediately obvious beyond specialists. By 1972, however, the opportunities dawned on the UK government, the main Westminster parties, and among allies abroad. While parliamentary committees began scrutinising the tax arrangements of oil companies, the American government responded to its declining production by investigating the oil reserves of one of its closest geopolitical allies. Oil executives began to arrive in numbers. Meanwhile, Scottish nationalists began to cry ‘It’s Scotland’s oil’. The causes of ‘Home Rule’ and Scottish independence had already begun to resuscitate from their deep sleeps in the 1960s, but North Sea oil’s discovery gave them a potent economic viability, with electoral consequences in 1974.
As such, while the 1973 oil crisis was no doubt chaotic in the short-term and helped fell a Conservative government, its longer-term impact on the UK was more complicated. The UK might not technically have been an ‘OPEC country’, but it would soon benefit from the cartel’s price hikes as a major oil producer. Indeed, during the 1974 elections, Wilson claimed that ‘by 1985 the Labour secretary state for energy will be chairman of OPEC’. North Sea oil would, it became clear, protect the UK’s political economy by enabling energy self-sufficiency and trade balance stability. It would also provide large tax revenues. In turn, this would give the government autonomy to undertake bold economic policy shifts.
Initially, it looked as if Labour would be the political beneficiaries. During their 1974-79 government, Labour created the nationalised British National Oil Corporation and developed plans for an interventionist industrial revival. As historian Ewan Gibbs points out, Labour’s plans for both coal and oil aimed to secure national ‘sovereignty’ over UK energy by ensuring self-sufficiency, overseen by nationalised industries. Yet oil did not fully come on stream until the early 1980s. In the meantime, it caused the UK problems – including during the 1976 sterling crisis, when the prospect of oil riches weakened Britain’s case abroad for leniency from the IMF, USA, and OPEC countries. The UK’s oil-based energy resilience was also dangerous for the power of trade unionists in a rival energy industry, like the coalminers. The Conservative right – soon to oust Ted Heath and install Margaret Thatcher as leader – was paying attention and would take advantage of these structural shifts when it returned to government in 1979.
Fifty years on, there is arguably an analogous development. Oil is still central to the world economy and thus to the economic legitimacy of Western states: we are still a ‘carbon democracy’, to use Timothy Mitchell’s phrase. But we are also beginning to undertake an energy transition to renewables, even if at a sluggish speed.
Fundamental energy transitions don’t come around that often, and they cannot help but have significant political consequences in both the immediate and long term. The UK has already achieved most of the low hanging fruit of the net zero transition, such as ramping up offshore wind power. A more fundamental transition might lead to greater energy resilience to geopolitical shocks, an enticing prospect after Russia’s 2022 invasion of Ukraine. Indeed, it could even lead to the emergence of a green-tinged vision of energy self-sufficiency, albeit one that is currently rivalled by the alternative claim that national energy security requires continued drilling in the North Sea. However, the more severe challenges of the green transition – such as removing gas boilers and insulating homes, greening food production, phasing out petrol cars, and building onshore windfarms in the teeth of local opposition – are yet to come. The raw material and component supply chains for renewables technology are also acutely vulnerable to geopolitical competition. Finally, the fabled ‘green jobs’ are unlikely to materialise in significant numbers.
The recent energy crises and the immediate costs of the green transition will therefore shape the coming British election as a point of contestation between – and within – the Conservative and Labour parties. The lesson of 1974, however, is to pay attention to the deep currents, as well as the surface froth. Key questions remain unanswered. How politically resilient are ‘green’ strategic objectives when under sustained attack from the right? How much will optimism about the potential positive side-effects of the transition be able to overcome pessimism about its potential fiscal and employment implications or fatalism about its viability as a project? The answers to these pivotal questions will not be immediately obvious, but some clues will be there, should analysts pay enough attention.