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IEA Ministerial meeting

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PRESS STATEMENT — by the M inister for National Development and Energy 82/20


The Minister for National Development and Energy, Senator Sir John Garrick, today released the text of the communique

of the meeting of the IEA Governing Board at Ministerial level. Senator Garrick represented Australia at the meeting in Paris.

IEA Ministers took the opportunity to carry out a searching stocktake of energy policies to date and future directions, Senator Garrick said.

The current soft oil market and easing of prices, whilst

a consequence of economic recession, are also due in large

part to the success of policies pursued by IEA countries

since 1977, he stressed. For IEA countries, estimated 1982 oil consumption of 32.5 million barrels per day would be

4 percent below 1981, which was already 6 percent below 1980.

The success of these policies offered Western economies a

breathing space in which to recover from the turbulent energy conditions of the past few years by reducing inflationary pressures and encouraging potential for economic growth.

This did not mean, however, that the energy problem was solved, Senator Garrick added. I

"IEA Ministers were unanimous in their view that whilst oil

markets had eased considerably, the underlying uncertainties • ' ' / .

and potential for disruption remain", he said.

The medium term outlook continues to be clouded by

uncertainties. Accordingly, we have to use this breathing

space constructively to ensure we are well-prepared for the

worst. In particular, it was agreed that the gains made

through conservation and substitution should be consolidated

and further efforts made to achieve oil savings and greater

energy efficiency.



Senator Garrick indicated that Ministers had useful

discussions on the prospects for coal., natural gas and nuclear

energy. All of these have vital roles to play in the strategies to reduce oil dependence. .Good progress has been

made and the prospects were encouraging.

"I stressed to the meeting, however, the importance of ensuring the projections were translated into reality. Governments must ensure constraints on increased use of coal and nuclear power in particular are minimised", he said.

Referring to the assessment by the 1EA Secretariat of the

areas where energy policy action in Australia could produce

useful results, Senator Garrick said these would be studied .

closely. In the case of electricity tariffs, he noted these

were the responsibility of State Governments and he would

bring it to their attention. '

Enquiries: T.J. McMahon (062) 453230


25 May 1982


The Governing Board of the International Energy Agency (IEA) met at Ministerial level on 24th May 1982 in Paris, under the Chairmanship of the Rt Hon Nigel Lawson, MP, Secretary of State for Energy for the United Kingdom.

1. Ministers considered the prospects for the oil market in the light of the recent changes in oil prices, as well as the contribution that energy conservation and progress in switching away from oil has made towards the continued fall in oil demand. They welcomed the progress so far but were aware of the risk of complacency and noted the need for continuing progress in bringing about a better energy mix. They emphasized the important role that market forces, supplemented where appropriate by government action, could continue to make

towards these ends. Ministers furthermore underlined the importance they attach to the need for timely development on an economic basis of IEA countries' energy resources, thereby improving the overall security of their energy supply.

General .

2. Ministers noted that substantial improvements have been made in increasing energy efficiency and substituting other fuels for oil, as a result of market reaction to higher prices, supplemented by effective government policies. Thus considerable progress has been made towards achieving the objectives agreed

upon in the IEA Ministerial meeting in May 1980 and also at the Venice Summit of June 1980. Although low economic growth has contributed to this result, the link between overall economic

activity and oil consumption has weakened considerably. However, they also concluded that despite the current more relaxed oil market situation, considerable uncertainties continue to exist about energy developments. The political situation

in the Middle East carries with it the underlying and ever present risk of oil supply interruptions. Furthermore, concentration on short-term oil market conditions, particularly under present economic conditions, is deterring producers and consumers from taking the investment decisions necessary to· meet probable long-term trends. Recognising that sustained

improvement in the level and structure of energy use is a critical element for revitalizing IEA economies in the medium- term, Ministers reconfirmed the IEA objective of improving overall energy efficiency and bringing about a more balanced energy mix, and agreed to pursue policies to that end.

3. Ministers noted that progress has also been made in improving preparations for supply interruptions, including the development of procedures for consultation and co-ordination in responding to oil supply interruptions of less than 7%, and the establishment of a new short-term information system.


They noted that study of stocks is continuing. Ministers noted that the 4th test of the Emergency Allocation System will be conducted in 1983 to continue to develop the operational readiness of the system and called for full participation by all Member countries in the test.

Short Term Oil Market Assessment

4. Ministers welcomed the reduced current demand for oil and noted the resulting weakening of oil prices. However, they recognised that there could be a turnaround in overall demand on short notice when the existing drawdown of oil

stocks ends or if a strong up-turn in economic activity occurs, and that the risk of a price shock caused by political disturbances remains. They concluded that the present situation should be viewed as a temporary one which does not necessarily indicate probable future developments based on underlying trends. They therefore agreed to continue to watch closely future developments, particularly in stock movements ,

and oil consumption. .

Structural Change . . . . .

5. Ministers agreed that recent movements in world oil prices, as well as bringing a welcome relief from inflationary pressures, provide an important opportunity to revitalize the world economy. However, their assessment of long-term energy prospects confirms the need for measures to sustain and improve upon progress made in reducing the growth of total energy

requirements and dependence on oil. They reconfirmed that this could be achieved through further improvement in energy efficiency, and by relying on other energy sources such as coal, nuclear, natural gas, and, in the very long term, renewable sources of energy to provide greater shares of the energy supply mix.

6. Ministers emphasized the importance of energy pricing in bringing about these changes. They agreed to give particular attention to energy pricing issues when developing national energy policies, including the need for oil prices to consumers to reflect world market prices; for electricity tariffs

that encourage efficiency and permit utilities to finance new capacity; and to avoid those subsidies of consumer prices and other interventions which discourage conservation, high levels of domestic production and substitution away from oil. They also recognised the need to take account of energy policy objectives in determining energy taxation.

7. Ministers noted that past increases in prices have made energy conservation even more economically attractive. They agreed that further efforts are required to improve energy efficiency in IEA countries and is needed to supplement market forces. Ministers agreed, therefore, to keep their

national energy conservation programs under review in order to ensure their full implementation and maintain their effectiveness.


8. Ministers discussed the role of electricity in achieving structural change and noted that, despite the economic and security-of-supply advantages which coal and nuclear power maintain over oil in generating electricity, even under conditions of weakening oil prices, greater efforts are required to achieve current development plans. Ministers agreed, therefore, to give further attention to the future prospects for electricity, and to address the factors which may constrain fuel-switching and thus achievement of the most cost-effective patterns of electricity generation, including uncertainty about the future level and structure of electricity demand; the effect of recent movements in oil and coal prices on the competitive position of coal relative to oil; regulatory impediments; and safety and environmental factors. .

9. Ministers agreed that to achieve necessary overall structural change away from oil which all IEA countries have agreed upon, nuclear power will have to play.a major and . increasing role in many countries. Ministers noted, however, that there has been some slowdown in nuclear development programs. In order to maintain momentum for the development

of nuclear power and to achieve current projections, further efforts are needed, internationally and by many IEA countries. Ministers therefore agreed to pursue policies for making licensing and regulatory processes inathese countries less

subject to frequent changes and delays; ensuring high safety standards in construction and operation of nuclear facilities; demonstrating the availability of technologies for the disposal of high-level radioactive waste ; and maintaining reliable international trade in nuclear materials and fuel cycle services, consistent with non-proliferation objectives. They welcomed the IEA/NEA assessment of nuclear prospects to . the end of this century, and agreed that further .study of

prospects for electricity growth and comparative analysis of nuclear power and-other energy options should be pursued.

10. Ministers reaffirmed their commitment to expand the use, production and trade of coal (including lignite) on an economic basis and with effective standards of environmental protection. They endorsed the general conclusions of the

IEA Review of countries' coal prospects and policies and expressed particular appreciation to the Coal Industry Advisory Board for the contribution it made to that Review and to other studies. Ministers will pay particular attention

to actions to realize the potential for expansion of economic coal production, trade and use, including efforts to ensure the long-term competitivity of coal; the timely development of port capacity and transportation facilities; and development

and commercialisation of environmentally acceptable technologies that encourage greater use of coal. They called on industry, both producing and consuming coal, to create,technical and economic conditions favourable for this development and called on the CIAB for continued assistance in this effort.


11. Ministers agreed that natural gas could play an important role in achieving better balanced energy economies, and stressed the need for greater understanding of market realities and willing­ ness to take account of market forces by all those involved in natural gas trade. Recognising that expanding use of gas in most countries will depend heavily on international trade,

Ministers agreed that further attention should be given to a number of options which exist to encourage stable and reliable natural gas trade and reduce the vulnerability to potential natural gas supply disruptions. These include diversification of supply sources; the timely development of indigenous IEA

sources; emergency storage; interruptable contracts; flexible supply arrangements; and the potential for co-operative approaches to assuring stable trade and reducing the overall costs of adequate supply security.

12. Ministers recognised the importance of energy investment in bringing about a better energy mix. They noted the general sluggishness of private investment in current economic circum­ stances and that several large energy projects that have high costs and long lead times have been recently deferred or . cancelled. While recognising that the short-term energy

situation has changed, they agreed that the longer-term situation remains uncertain and stressed the important role that energy investment must play in assuring energy security.

13. Ministers stressed the continued importance of energy R ,D&D, despite changing expectations regarding the development and commercialisation of new energy technologies. They noted the marked reduction in many countries in expenditure on commercialisation and questioned whether private investment would be available to provide adequate and timely development of some technologies that have high costs and long lead times. They therefore agreed to review national RD&D programs, especially those involving significant.funding, to ensure that they are in line with current views of future needs and to see how further sharing of cost and expertise could contribute to more effective action.

International Energy Relations

14. Because of the global nature of energy questions, Ministers agreed on the importance of all countries recognising the nature of energy as a decisive element for progress in the world economy and, in particular, for the development of the poorer countries. They agreed that the Program of Action adopted by the Nairobi Conference on New and Renewable Sources of Energy reflects a pragmatic approach to that., end, and that the IEA and its Member countries will make a positive and constructive contribution ' to its sustained and effective implementation. Ministers noted that many developing countries have promising energy resources, but that their expeditious development will require finance, expertise and technology. While external financial support provided for energy development in developing, countries has risen

significantly, continued weight will be given to energy in both multilateral and national aid programs. They agreed upon the need for better understanding of constraints affecting energy


investment in developing countries, and for co-operative participation by enterprises with significant financial and technological resources as well as by governments and international organisations. Ministers noted the.various contacts which are underway between oil producer and consumer countries, and stressed the need to enhance such exchanges in order to improve mutual understanding of the oil and energy situation. Ministers believe this will contribute to greater stability in the world energy situation which is vital to future development of the world economy

as a whole. ■ '