Self sufficient energy policy and international monetary relations. The US and the West European countries’ search for alternatives to oil between the downfall of Bretton Woods and the new floating regime

This work in progress research aims to investigate the energy policies that the West European countries undertook by the mid-1970s to cope with the world scale oil crisis and its impact on the European economies. The research hypothesis is that there was a close interplay between the early 1970s’ transformations in the international monetary system and the following skyrocketing rise in oil prices on world markets, and that this began as early as the mid-1960s when the combining between the west European currencies’ devaluations and the rising instability of crude oil prices started threatening the Western bloc countries’ control over energy sources on world markets and prices. The main argument is that this increasing incapacity to shape world trade of oil and to keep under control the price of crude oil and hydrocarbon compounds was accelerated and worsened by the end of fixed exchange rate systems. As a matter of fact, this in turn removed whatever monetary burden to inflation on raw material prices. In order to confront this new framework, the oil consuming advanced industrial societies, and particularly the West European economies, underwent a new and breaking energy policy. An import substitution energy policy based on the one side on nuclear power; on the other, on natural gas, resumption of coal mining and full exploitation of energy conservation and renewable energy sources, replaced a former path dependence energy policy based on foreign supply of crude and refined oil. This change marked a major watershed in the supply policy of raw material for energy requirements of the west European countries, included the UK, with respect to the 1950s and 1960s path dependence approach to fuel supply, and was a major issue to transatlantic relations in the decade.

The portion of research to be presented explores this subject and maintain the above argument through an in-depth investigation of some west-European national case studies to highlight convergences and divergences among the European community member states. Furthermore, it offers an analysis on how this import substitution energy policy was drafted and pinpointed at European level and fully supported by the United States’ governments. In this respect, a close attention will be paid to both the European Community’s debates and proposals on energy policy related matters, and the American search for a balance between the reorganization of its international economic hegemony through a tight control and regulation on production and international trade of oil, and the impact of oil price on its West European allies. On the one side, the authorities of the European communities’ devised this new self sufficient energy policy aimed at combining raw material supply with a floating international exchange rate system to avoid pressures on the their foreign exchange rate equilibrium. On the other one, Washington and the international financial institutions took a lead in supporting and financing this major change in the West European energy policy with credit and loan lines aimed to fund nuclear power plants and diversification policies in order to hike off the impact of oil crises on the West European economies’ internal growth and foreign exchange equilibrium.