In my opinion there has not been any event since the Second World War which has so clearly challenged the fundamental national interests of Ireland as this present crisis. Proportionately Ireland has more citizens held illegally against their will in Kuwait and Iraq than any other Western nation. The scale of the implications for the Irish economy are being felt probably more acutely and immediately than in any other EC member state through the closure of a major beef export market and the potentially devastating consequences of that for Irish farmers, industrialists and the general level of confidence in the Irish Stock Exchange.
Add to these acute anxieties the shared interest we have with the European Community and the rest of the Western World in ensuring that the Iraqi regime does not get its hands on the entire strategic oil reserves of the Middle East, and the full extent of the threat to our well-being is revealed.
Ireland, as a small open economy, is one of the most trade-dependent in Europe, with the consequences that anything that damages the international trading environment — and who could argue that Saddam Hussein's control of Mid-Eastern oil would not do so — more than proportionately affects our interests. To paraphrase an old saying which was used when we were more dependent on trade with Britain: "If the world economy catches a cold, then because of our openness, Ireland will get pneumonia".
It is quite obvious therefore that Ireland's national interests in respect of the fall-out from the Gulf crisis are, in some key respects, indistinguishable from those of other countries.
This point compels me to say, on behalf of the Progressive Democrats, that the weight of international opinion, as expressed by the UN and the European Community, is correct in condemning Iraq's annexation of Kuwait, and in demanding that Saddam Hussein unconditionally withdraw from that country. That is why I wholeheartedly welcome the decision of the United Nations Security Council to define the conditions in relation to the effective military policing of the trade sanctions against Iraq.
The decision places the international military response to the Iraqi annexation of Kuwait in a firm, collective and multilateral context. This is an important check and balance against the possibility of any excessive or over-zealous unilateral intervention, and is a further indication of international solidarity and cohesion. This is one of the principles that should underline our ongoing response in foreign policy terms, that is, that all efforts to arrive at a solution to the Gulf crisis must be firmly based on multi-lateralism.
Within the wider international response, under the Italian Presidency, the European Community has sought to co-ordinate both its diplomatic and — through the Western European Union — its military response to the crisis. Ireland has fully supported the entire range of EC diplomatic initiatives but has chosen, on the basis of our traditional policy of neutrality, to distance ourselves from the military response, even to the extent of refusing observer status at the recent Western European Union meeting. Never before has the EC sought to develop such a wide-ranging and far-reaching response to a foreign policy crisis.
Apart from the Gulf crisis, under the Italian Presidency of the EC the first meeting of the Intergovernmental Conference on Political Union will take place next December. Inevitably that agenda will focus on the effective definition, co-ordination and implementation of an EC foreign policy capacity. Inevitably, arising from the experience of the Gulf crisis, the political and military aspects of this process will be inter-related for the obvious reason, which can be clearly seen today, that in certain contexts they are inseparable.
The current crisis teaches us, like no other, that in relation to future European policies Ireland needs to face up squarely to what are its interests; with whom do we share them most closely and to what extent is it in our longer-term interest to deepen our integration with our EC partners, on the one hand, while in other vital matters choosing to keep our distance. Indeed the question arises not only as to where our vital interests lie, but also whether in the longer term we do not also share, in common with our Community partners, certain international obligations as well as rights and interests.
The present crisis has also renewed debate on the possible introduction of a foreign affairs committee in the Dáil. When this was last mooted some months ago, my party, as part of Government, voted against the proposal, not because of any fundamental objection in principle to the idea of widening the range of committees in the House but rather because we believe consideration of this should be part of a more extensive programme of Oireachtas reform. The issue of Oireachtas reform needs to be given more urgent attention. For my part I am committing the Progressive Democrats to ensuring that progress will be made on this issue in line with the agreement in the Programme for Government as soon as possible.
I have tried in my contribution up to this point to confine my remarks to what I would regard as the principles which underline the foreign policy response in relation to the Gulf crisis, and indeed to raise some wider questions about where our longer-term interests lie in regard to the making of foreign policy particularly in an EC context.
However, the most immediate and urgent consideration is our deep humanitarian concerns and obligations in relation to the approximately 350 Irish people, some of these personal friends and constitutents of mine, who are scandalously and illegally held against their will in Kuwait and Iraq by the Iraqi authorities. On behalf of the Progressive Democrats I want to condemn this illegal action in the most forthright terms and also to say to the relatives of those who are trapped that as far as we are concerned, your concerns and the welfare of your family members in Iraq and Kuwait, are the most acute priority facing us in Ireland in relation to the current Gulf crisis.
I am satisfied that our Department of Foreign Affairs are doing everything humanly possible to help in the present unacceptable situation. And I am sure that we here today fervently hope that the report of last night that Iraq is prepared to let women and children go, turns out to be correct. But of course that development, welcome though it would be, would be far from adequate. All citizens, men, women and children, from Ireland and other foreign countries, now detained against their will in Iraq and Kuwait must be allowed their freedom to leave if they so wish.
I wish to turn now to my special area of responsibility and the role of the Department of Energy in this present situation. From the debate so far it is clear that the House recalls quite clearly the impact of an oil crisis both on the world economy and on the domestic Irish economy. It is reassuring, however, that we have at least used the experience of earlier crises to good effect. The world is far better prepared in 1990 to absorb the present disturbances in the oil markets than it was in 1979 and 1973. Psychologically and tactically we are now better able to cope with the required adjustments.
One specific lesson that was learnt from experience is that it is necessary to have adequate stocks. World oil stocks are at an all-time high, and this is the most reassuring aspect of the present situation. There is no shortage of oil in the market nor has any shortage of product appeared in the markets of Western Europe and North America. More importantly, from our viewpoint, there is no shortage of product in the Irish market. Stocks are at prudent levels and indeed will be augmented further. Irish consumers — both household and business — can be reassured that measures taken in recent years and further improved in recent weeks, will meet all normal demand patterns.
While there is a comfortable supply of oil in the market this is not to understate the seriousness of the current Gulf crisis. The sanctions on Iraqi and Kuwaiti oil put in place recently by the United Nations effectively took 20 per cent of current OPEC oil production out of the market. This represents around 7 per cent of current world production. I am heartened to note that, as of today, creative efforts are being made within OPEC to bridge, partially or wholly, this shortfall in supply by additional production in certain OPEC countries. However, even if such an agreement were put into place, it should not lull us into a false sense of complacency. Oil markets will be disturbed for some time, notably as regards price. It is still possible that certain shortages could emerge in world markets.
OPEC production earlier this year reached almost 24 million barrels per day against a demand of 22.5 million barrels per day. This resulted in a stock-build in most of the industrialised world. As a result general stock levels this summer are quite healthy. Nevertheless, as the heating season approaches the call on OPEC oil will increase to 23.5 million barrels per day, and today's OPEC meeting which may agree increased production on the part of key members such as Saudi Arabia and Venezueia, will be an important factor in ensuring that this demand is met.
All Deputies will know that the Irish market is supplied by the direct importation by the private oil companies of a range of products, notably petrol and gasoil. This covers 65 per cent of our oil products consumption. The remaining 35 per cent comes in the form of crude oil which is refined by the Irish National Petroleum Corporation at Whitegate in Cork. The strategic value of having our own refinery is once again highlighted at times of uncertainty as at present. Whitegate is a hydroskimming refinery with a nominal maximum capacity of 56,000 barrels per day. It is currently operating flat out at a technical maximum of just under 50,000 barrels per day. The refinery has a crude and storage capacity of approximately 250,000 tonnes. The INPC have already acted swiftly to increase stocks. In addition output from the refinery is being maximised. I have asked the company that Whitegate be operated at full capacity for the foreseeable future to supply market demands and to build stocks further. The uncertainty in the world markets that I referred to earlier has manifested itself so far in the form of rapid price movement. While no significant shortage has emerged, the predictable nervousness has resulted in price increases which have little to do with the underlying aggregate supply and demand situation.
The price of crude oil and product prices on international spot markets has rocketed since the outbreak of hostilities in the Gulf; the dollar price of spot petrol has risen by over 64 per cent in the last 50 days; the dollar price of spot gasoil has risen by over 63 per cent in the same period; and the dollar price of crude has risen by 80 per cent in the same period.
At the very outset of this crisis some weeks ago, I took immediate steps to add to this country's security of supply. I arranged that additional supply of both crude oil and products be sought and put in position as quickly as possible to further augment existing stocks. First: 10,000 tonnes of gasoil storage was prepared in the ESB facility at the North Wall. This was filled with gasoil in recent days by means of a specially arranged additional shipment; secondly: a 17,000 tonne fuel oil tank has been prepared for gasoil storage in Whitegate. The special cargo in question was moved into Whitegate yesterday; and thirdly: agreement has been reached with Irish Shell Limited to provide an 11,000 tonne depot at Limerick for use by INPC to store petrol. At present, due to the maximum capacity operations at Whitegate, additional petrol storage requirements will be needed by INPC and shipments into the Limerick depot will begin next week; and fourthly: the question of putting further ESB gasoil tankage at Marina is currently being examined and a decision will be made on this within the next 48 hours.
Stocks of gasoil already put in place amount to six days' national supply. Stocks of petrol which will be put in place in the next ten days will amount to five days' national supply. These quantities would meet a 20 per cent national shortfall for a period in excess of 25 days; it is important to recognise the value of prompt stockbuild action at this time. Crude oil capacity storage at Whitegate has been topped up to the greatest possible extent in the last few weeks and, more importantly, I have sought the immediate reactivation of the major Whiddy oil terminal. The work necessary to reopen Whiddy was put in hands right away and I am confident that up to an additional 200,000 tonnes of crude oil can be put in place by operations which will be carried out to the highest possible safety standards and will add another 20 days to national supply.
All these additional supplies, giving a total national supply of between 110 and 120 days, are above and beyond our commitment to the European Community and the International Energy Agency which is to maintain a stock of 90 days' supply. Prior to the Gulf crisis we had around 96 days' stock, thereby making our own contribution to international security. While the 90 days stipulation is a primary line of defence for any country, it is a part of a wider umbrella provision under the statutory requirements of EC regulations. There are similar benefits in participating in the security stocks arrangements of the International Energy Agency. It is important, however, to recognise that the decision to establish these strategic stocks was made following the shortage of the mid seventies. In general they would not be used unless a genuine shortage emerged or was self-evidently imminent. It is not likely that they would be used to play the market and released in such a way as a contra cyclical influence on price. Security of supply is precisely as its title suggests: the stocks are used to ensure that any possible breakdown in supply is countered or prevented.
Ireland is one of the 21 member countries of the International Energy Agency. This agency was established in 1974 as a result of the 1973 oil supply disruption with the view to implementing an International Energy Programme.
The aims of the agency are: to foster co-operation among IEA participating countries and to reduce excessive dependence on oil; to maintain an information system on the international oil market; to encourage consultation and co-operation with oil-producing and other oil-consuming countries; and to formulate policies to safeguard participating countries against the risk of a major disruption of oil supplies and to share available oil in the event of an emergency.
The main requirements of IEA policy are: agreement to share stocks in an emergency; that member countries maintain 90 days' stocks; and that member countries have co-ordinated energy policies.
The governing board are the IEA's main decision-making body and is comprised of senior energy representatives of member states. The governing board have already met during the past month and have arranged a further meeting for Friday next. They are keeping current events under review and are prepared to take whatever action is considered necessary at short notice. I am confident that the IEA will take whatever steps are necessary to ensure a co-ordinated and effective response by the industrialised world to the evolving situation in the oil market. Ireland will play the fullest role in these deliberations.
Unusual events bring out an unusual response. Already I must acknowledge the professional way the INPC have responded to my request. The willing co-operation of the ESB has also been very helpful. In addition, my own Department are getting a first-class response from other agencies involved in identification of additional capacity and in the reactivation of Whiddy.
One of the reasons the world is far better prepared than it was for the oil shocks of 1973 and 1979 is that conservation measures and conservationists' attitudes fostered by these earlier events have resulted in modern economies being less energy-intensive. In short we get more output from far less input of oil. It seems a pity that it requires milestone unsettling events such as an oil crisis to galvanise people to act in their own self-interest. This is not a sentiment I am expressing for the first time. Earlier this year I made a major announcement on conservation setting out my objectives and stating the first immediate steps that would be taken. This initiative was further facilitated by an additional allocation of a half million pounds earlier this year on budget day.
Since then I have set up a National Energy Conservation Advisory Group which will examine the current conservation programme and make recommendations on additional conservation measures that could be taken. Industrial, commercial and academic expertise is represented on this group which is to report to me by the end of the year.
The composition of this group is as follows: Mr. Pat O'Malley, Chairman, Special Adviser to the Minister for Energy; Mr. Patrick Duffy, Managing Director, Moy Insulation Limited; Mr. John McCarrick; Dr. Aidan O'Boyle, Director of Industrial Policy, Confederation of Irish Industry; Dr. Eoin O'Neill, Director of Innovation Services, O'Reilly Institute, Trinity College; Mr. David Taylor, Manager, Energy Programme, Eolas; and Professor G.T. Wrixon, National Microelectronics Research Centre, University College, Cork.
Even though the steps to set up this new national group pre-dated the current Gulf crisis, the present heightened prices will, no doubt, help them and my Department to get consumers to focus on further conservation measures. In addition a number of other initiatives were taken earlier in the year which will get further impetus from the current conditions. A specific group, entitled the Group to Improve Efficiency in Electricity End-Use, has been set up. Electricity accounts for one third of the country's total primary energy requirements. Projects have also been initiated to promote installation of energy management systems in hospitals and to investigate the potential of naturally occurring warm ground water. These efforts which I have cited are in addition to my Department's ongoing conservation programme. On behalf of the Department Eolas operate a continuing conservation and energy efficiency service for the public in general and have a specific programme in 1990 geared towards certain sectors, notably the hotel, food and chemical industries.
I regard energy conservation as a most important element in my Department's energy policy. Conservation can make a substantial contribution to satisfying the country's energy needs, to the balance of payments, to improving competitiveness of Irish industry and, of course, to redressing environmental damage resulting from some forms of energy consumption. While I sincerely hope that the current high prices for oil and oil products in the international markets will come down rapidly it may, ironically, serve a useful purpose. Energy conservation usually has an attractive financial payback whether it is for major industrial installations or a simple lagging jacket around a household water tank. Increased energy prices will enhance this pay-back and may encourage a further conservation drive similar to those in the seventies and early eighties.
Continuing attention will be given to the promotion of alternative energy resources where technical and reliability criteria can be met and where it is economical to do so.
Hydropower contributes to some 5 per cent of our electricity requirements and there is some small potential for further hydro developments. As regards windpower, international experience indicates that the best means of wind energy development is through the use of wind farms, that is large numbers of wind generators in a single location. However, the economics of such schemes depend very much on the capital costs involved and on the price paid for the electricity produced. A windfarm project in the west of Ireland is under active consideration in my Department at present. My Department are keeping in touch with international research developments in relation to tidal and wave power, solar energy, biomass and other alternative energy possibilities.
Another theme of the debate so far has been a large degree of consensus on the lessons of the past. Ireland is a small open economy which cannot insulate itself against adjustment required in the world market place. Deputies will be aware that, in the UK, petrol prices have increased by more than 20p per gallon in direct response to developments in the Gulf. These increases have yet to affect the Irish market. We have all seen in recent weeks and in the past that economies as powerful and as influential as the United States are still price takers when it comes to a commodity such as oil. Attempting to contrive a situation where Irish consumers would somehow be protected from world price movements would be wrong as the price message going to oil consumers would be false and it would ultimately lead to a misallocation of resources. Similarly, increased foreign borrowing to be used as an offset against the impact of the real transfer from oil consuming countries to oil producing countries was clearly demonstrated to be one of the international follies of the early eighties. Countries which attempted this still took many years to work off the additional burden placed on them and many of them have not worked off that balance.
In conclusion, I can summarise by saying that we are facing an unsettled and uncertain world oil market. For example, the spot price of petrol plunged by a massive $57 per tonne or over 14 per cent at Rotterdam by close of business last night but by 11.30 this morning prices had changed tack and increased by $7 per tonne. Nevertheless, it is fair to say that we are in a much better state of preparedness than for previous oil shocks. Oil supply in Ireland is adequate and has been enhanced recently by the arrangements I have mentioned already. Consumers and the public in general cannot be blamed for slipping into a frame of mind which takes oil supply for granted when the memory of earlier crises fade and when prices are steady and relatively low. Given, however, the impact of political events in the post war era, starting with the crises induced by the Korean war, the Government's strategic planning does not rely on the market and their policy on adequate stocks is one of constant preparedness.