This Fourth Report is one of the items for discussion today. I should like to discuss chapter 19 of this report which deals with energy and, in particular, with the agreement of the International Energy Programme and the establishment of the International Energy Agency.
As the report points out, there is specific allowance in the International Energy Programme for accession to the agreement by the EEC. Unfortunately, however, one of the Nine has decided not to accede to the agreement. Consequently, the Community as a whole cannot sign the agreement. As the report points out also, Ireland signed the agreement on November 18th last and this should have been ratified by Dáil Éireann before May 1st this year but because it had not gone through Dáil Éireann at that stage—not only Dáil Éireann were in this position because the agreement had not been ratified by the Parliaments of a number of other countries at that date—there was a general putting forward of the signing of the agreement until September 1st next when, I hope, we will become full members of the IEA. There has been some criticism of this International Energy Agency from many sources in different countries but, by and large, anybody who considers the situation brought about by the energy crisis during the past 18 months should realise that it is essential that the consumer countries of the world should not find themselves in the position again in which they were in October, 1973—unprepared totally for the embargo on oil supplies imposed by the oil-producing countries. Having experienced that situation, we would be criminally negligent if we did not make some arrangement to deal with the eventuality of another such emergency.
After the Washington Conference of February, 1974, it was decided that countries inside the OECD—the OECD had already started to formulate an energy policy for dealing with emergencies—would be at least rash if they did not realise the effects of an oil embargo and if they did not take some steps to avoid a recurrence of those effects.
The effects vary from country to country. As a country which imports more than 70 per cent of our energy needs in the form of oil, we were hit hard. In fairness to the producing countries it can be said that we, like other countries in the West, built our economies in the fifties and sixties on oil that we bought at cheap prices, at below value. However, it would have been expecting too much of human nature for any of us to have told the producers that they were not charging enough for their products. We took advantage of the situation and advanced our economies on this cheap energy. However, the producing countries decided then to put an embargo on products and they quadrupled the price of oil within ten weeks. This had a profound effect on our economy. However, the underdeveloped countries were hit much harder than were the developing or developed countries. It was against that background that it was decided at Washington that some form of co-operation should be devised whereby we could develop methods or strategies to deal with another emergency. It was decided also that there should be some type of long-term co-operation in regard to the research and development of alternative sources of energy because the amount of oil in the world is limited. Figures quoted in newspapers and journals differ in this regard so that nobody can be sure of what are the world's oil reserves but we know they are limited. That, in itself, is enough to warrant the development of long-term co-operation in respect of the research and development of alternative sources of energy.
The very important point of the agency is its relations with the producing countries, not in a spirit of confrontation but of co-operation. It is essential if the world is not to go into conflict again over energy and oil.
The fourth objective of the agreement is to induce some sort of transparence into the oil market. The international oil companies are big and wealthy. They are powerful in a lot of countries and they transcend ordinary political boundaries of countries. To have every country looking at them in isolation would not give a true picture of their activities. One of the most important functions of the agency is that they should come to understand how the oil market operates. By gathering information collected from the 18 countries who signed the agreement they would come to understand and control, better, if it is necessary to control, the multi-national oil companies. I would not like to prejudge that though it is natural for people to shout at multi-national oil companies and say that they are robbing the countries of the world. I would not like to prejudge what the findings of this co-ordinating group of the International Energy Agency will be on this matter but it is necessary that Governments, in co-operation with one another, should have as much information as possible. If it is necessary to control multi-national companies they should have this information.
For any one country to say that, with the limited amount of information at their disposal, they could control the multi-national companies is ridiculous because the fact that they are multi-national means that there must be a multi-national approach to controlling them. There must be an approach amongst Governments to control them. The four objectives of the agency are in conformity with the Government's attitude towards an energy policy. There has been a lot of criticism about the composition of this agency. There was criticism because some countries joined and others did not and because of the alleged domination by other countries. It is true that one of the partners of the EEC. France, did not join the agency. That is regrettable and I should like to see the EEC joining as a bloc. Their combined weight of voting within the agency would exceed that of the US, a country a lot of members fear.
Members prefaced their remarks about the US by saying that they thought the Americans were a marvellous people, that they were all for them but we should not associate with them. This is contradictory. Of all the great nations of the world the United States have been the most generous in their attitude towards other countries. The fact that France did not join is a matter for the French Government but when people say that we should not join the agency because France did not join they should remember that Germany, Italy, Holland, Belgium, Luxembourg, Denmark and the United Kingdom joined. In all eight of the nine members of the community joined the agency. I am convinced our decision to join the agency was the correct one.
The Norwegian Government decided against full membership because they could not agree to the oil-sharing programme but the other three objectives of the agency have been confirmed by that Government. It is interesting to note when accession to the agency was being debated in the Norwegian Parliament it was carried by 102 votes to 18. Among the 102 who voted in favour was an opposition party who criticised the Government for not becoming full members. Norway at present export oil but yet their Parliament thought they should become full members of this agency.
There has been a tendency to look upon this agency as having been set up deliberately to confront the producing nations but that is not true. Obviously, the interests of the consuming nations are different from those of the producing nations. In this agency the consumers have drawn up a programme for a discussion with the producing nations. This is feasible and has a good chance, in spite of the fact that the Paris meeting in April did not produce the results we hoped for. I hope that meeting will be reconvened before the end of this year and that at that meeting there will be agreement among the producers and consumers on oil prices, the future of the oil industry and on other raw materials which some of the producing nations are anxious to have discussed. I believe this will come about.
When people criticise the international agency they remark that there will be oil off our shores in a few years. For that reason they believe we should join the producers. People who make those remarks are ignorant of what the letters OPEC stand for. I have heard responsible people say that we should not join the IEA but that we should join OPEC. The latter organisation is one for petroleum exporting countries. We have not got any oil but yet it is suggested that we should join an organisation of petroleum exporting countries. Those people also show a great ignorance of the composition of that organisation. If a nation wishes to join OPEC that nation must have the support of 75 per cent of the existing membership, a similar economic outlook to the other members and must be accepted by the five original members of that organisation.
Hopefully, we will discover oil off our coast but that is another story. Drilling is in progress and the licences have been issued. I hope oil in significant quantities will be discovered off the coast. It should be remembered that we are not married for all time to this agreement and if that day comes we could consider joining OPEC. However, we must deal with the situation as it is now and not what we hope it will be in the future. This kind of comment on this agreement shows a shallow appreciation of what the IEA is about or what the world oil market is about.
There has been a lot of criticism of the agency because of the voting system within it. The allegation has been made that this is dominated by the United States and that they will shove their opinion down the throats of every other nation. This is not true because the voting has been carefully weighted to ensure that no one country can dominate the agency. The agreement cannot be changed without the agreement of every signatory to it. That means that the United States have a veto on the changing of that agreement but we also have a veto on the changing of it. We can veto any effort made, even by all of the other 17 members, to change that agreement.
The majority voting in the agency is very carefully blended so that no country can heedlessly hold up progress, nor can any country or group of countries put their point of view against the consensus of the wishes of the participating countries.
It has been said from time to time that, say, the United States, Holland and Japan could by combining their votes bring about, for example, the introduction of a rationing system for oil. This is not true, because there is the unanimous vote that can change the agreement, and there are two other types of votes. There is the majority vote which deals really with the management of the whole agency, and it needs 60 per cent of the votes to carry any proposition under that, and not just 60 per cent of the combined votes. As I say, there are two types of votes. Each participating country has what are called general votes and then there are votes according to the consumption of the participating countries. Under oil consumption we have no vote, but neither have three other countries—Luxembourg, New Zealand and Norway—because our consumption is less than 1 per cent.
Under the agreement the United States have 48 votes plus three participating votes, making a total of 51. However, the eight countries who have joined the agency from the European Communities have between them almost as many as the United States and, if France had become a member of the European Communities, they could outvote the United States in the agency. Therefore, to infer that this is an agency dominated by America for selfish reasons is misleading. I think the whole history of the United States would show that they have not been selfish for the lifetime of anybody in this House or, indeed, for hundreds of years, in their attitude to the rest of the world. I am sure it is not their intention to use this to have their own way in the energy field in the world today.
It is totally untrue to say that the United States, Holland and Japan or, as in the other example given, the United States, Germany and Japan, could by coming together force their will on the rest of the eight. It is untrue even according to the figures in the printed agreement, because between these three countries they have nine general votes and between them they have 71 oil consumption votes which gives them a combined voting strength of 80. However, two-thirds of the 60 per cent that is necessary for a change is 93 votes. These countries between them have only 80 votes, but even if they had 94 votes which would give them the 60 per cent, they could not do anything unless they had the support of a further six countries because the voting is designed in such a way in the agency that for a majority vote there must be 60 per cent of the combined votes plus nine countries in approval of the measure. Of course, it is true to say that three countries could block anything the others proposed, but that is the kind of negative thing I cannot see ever arising. What we want is an assurance or a method that would allow us to stop the agreement going further than we would like it to go.
The other example given was the United States, Holland and Japan, but in that case they have only 74 votes. Therefore, the people who trot out these figures have not read the agreement, or if they have they have not understood it or have not made any effort to see that what they are saying conforms with what is in the agreement. This agreement was read by a number of people very casually. Without having read the small print of the balances that are there, they have trotted out these figures in public to bolster up what was in the agreement.
This country made a major contribution to the devising of the system of votes, particularly in relation to the devising of the oil consumption and the general votes. This indicates that even the smallest country can have a significant say in future policy agreements under the International Energy Agency.
One of the co-ordinating groups in the IEA is Research and Development, and this we consider to be very significant and important, because a country that is 70 per cent dependent for its energy on imported oil must, as far as possible, diminish that dependence internally, if that is possible, but certainly, if that is not possible, it should try to diversify its supplies of oil from outside sources. The Government, recognising the necessity to pursue this vigorously, have agreed to the third development programme of Bord na Móna. Tributes have been paid in this House on a number of occasions to Bord na Móna, and I would like to join in those tributes. Twenty-four per cent of the electricity generated in this country is being provided by turf. Within the next few weeks I shall be bringing a Bill before the House to allow them to go ahead with the third programme under which the amount of electricity being generated from peat will be increased, but not necessarily by 24 per cent because we shall hopefully get back on to a growth margin there again.
Then there are the expected finds off the coast. I should say here that there is no danger, as has been inferred, of anybody getting their hands on our oil off the south coast. That is our property, and what we are agreeing to share in this agency is the stocks of oil it is necessary under the agency and, indeed, under the EEC, to maintain. The levels of stock holding for both are exactly the same, 90 days. It has been said that this will cost us a fortune, but this is based on the assumption that this 90 days is additional to the 90 days we have to provide under EEC regulations. Of course, it is the same 90 days, so even if we never joined this agency we would have to provide 90 days storage for oil anyway. As I say, it is not true that membership of this agency will allow people to get hold of the oil or gas we hope to have on the south coast. All we are being asked to do in the event of an emergency in another country is to share our 90 days' supply to the proposed level below that, depending on the level of shortage in other countries or indeed, in all the countries combined.
We have joined this agency for 10 years. The whole agency will be reviewed after five years. Our initial period is three years and then we can give one month's notice if we desire to pull out of the agency. Therefore, after four years we could be totally out of the agency again. Maybe the picture will have changed by then, we may have oil and we may want to pull out. At the moment we have no oil and we would be very lax and indifferent to the needs of our people if we did not see that, in the event of another oil emergency, there was some oil-sharing system in which we could participate.
If we have more than our requirements of oil in future and if we pull out of this agency in another four to ten years' time, if a country finds itself in an economic recession because of an embargo imposed by a supplier of oil, if I am Minister I would hope to influence the decision that we would not adopt an isolationist selfish policy, that even if we had no international binding commitment to share oil, we would supply it to a neighbour or any other country. That would apply to any Government in this country at any time, that if that should happen we would recognise our moral if not our legal obligation to help a neighbour in trouble.
There has been a great deal of talk about the floor price for oil and about the price of oil being too high and the suggestion is made that we are proposing to increase it. That is not what is intended, as is quite obvious.
Up to 1973 the price of oil was a dollar a barrel and is now about ten dollars a barrel. The thinking behind the floor price for oil is that the price should not be allowed to drop to one dollar a barrel again. This is intended to ensure that there will be sufficient people interested in producing oil and that the price will be sufficiently rewarding to encourage people to get oil in places where the cost of production is very high. The Minister for Industry and Commerce within the last three weeks issued licences for the exploration of the Celtic Sea for oil and gas and there was a queue outside his door for those licences. If the price of oil was a dollar a barrel and if it was available in unlimited quantities from the Middle East countries, nobody would be looking for a licence because it would be impossible to get oil out of the Celtic Sea at a dollar a barrel. It must be profitable and commercially viable to explore for oil. The producers must be assured of a return in the long term on their huge investment. If Governments do not agree to a level below which the price will not be allowed to drop, interest in the Celtic Sea will be nil. People will not put their money into that type of exploration and exploitation which does not offer a reward or even a possibility of getting their investment back.
When we talk of a floor price or a minimum price for oil, we are talking about a price that makes it feasible for exploration to take place. That applies also to the production of other forms of energy—solar, fusion, fission, nuclear. Production must be made attractive to investors. We are not talking about putting the price of oil up beyond its present level. We are talking about giving a reasonable guarantee to people who invest money in exploration where the operation is very expensive. The cost of the drilling now taking place off the south coast of Ireland is running into millions of pounds and that is not the most expensive place at which to get oil. The place at which gas has been found off the south coast is only 30 miles out and is in relatively shallow water. The further out one has to go and the deeper the water, the greater the cost. If the oil that is brought ashore is double the price at which oil is available on shore, there is no inducement to invest in exploitation. We must be realistic.
It is in our interests to get as much control as possible of our energy supply and to get it as near our shores as possible. We will not get that if the price falls to a level at which nobody is interested in exploitation. In that case we will remain dependent as to 70 per cent of our requirements on imported oil from the Middle East and vulnerable to the same embargoes that have done so much damage to the economy in the last 18 months. We must avoid that possibility. We must ensure, in co-operation with the EEC or the IEA that we will be protected in the event of another emergency and that funds and encouragement will be provided for the exploration and development of other forms of energy. The International Energy Agency allows us to do that. The decision by Ireland to join that agency was a correct one. We would have been negligent in our duty if we had done otherwise. The price of oil may rise marginally this year. I just do not know. Increases of up to 20 per cent have been quoted in relation to the OPEC countries on 1st October next.
If we were to allow another five or six years to elapse without taking action and were to allow ourselves to slide back into dependence on imported oil, even though it benefited us in the immediate future to have cheap oil for industry and the country generally, we would be rightly accused of negligence. We are talking at a time when there is no certainty about there being oil off the south coast but if we do get it we do not want it for the purposes of trade, unless we get it in huge quantities. We want oil as a source of energy on which to build our economy. The more control we have over that energy within our own shores, the more control we have over the economy and the less danger there is of being affected by decisions taken thousands of miles away that are totally outside our control and are taken regardless of the effect they will have on our economy. I do not blame producing countries for taking decisions without regard to what they do to us. They have their own business and their own countries to run. They have this valuable product which they have been selling at too low a price. We failed to face up to that fact for 20 years. We failed to allow the price to move up gradually. Therefore, we took the full brunt of 20 years' increase in two months, with the resultant inflationary effect on so many countries.