HL Deb 07 March 1979 vol 399 cc187-206

3.15 p.m.

The Earl of HALSBURY rose to draw attention to the need for revising the current provisions of the energy programme and the prices and incomes control programmes in the light of recent events in Iran; and to move for Papers. The noble Earl said: My Lords, in addressing your Lordships' House this afternoon, I am mindful that it is the first occasion on which I have been privileged to do so since debating the Motion of my noble friend Lord Somers on the need for making shorter speeches. While it is not in mortals to command success, I shall endeavour to practise what I then preached. I shall not try to deliver an introductory chapter to a textbook on the subject but be content to act as compère to the distinguished list of speakers who have put their names down to speak this afternoon, and to highlight one or two topics which they may then clothe with garments of their own choosing in the course of the debate.

The crisis in Iran has its background and its foreground. Doubtless when the information is of no use to anybody, the historians will be able to fill in the details for the benefit of students. Here I can only refer to the foreground and treat it as coterminous with this Session of Parliament, since it was on 1st November that we here listened to the gracious Speech from the Throne, while in Iran the workers in the oilfields declared a general strike of a political character. Since then the crisis in Iran has deepened to the point where the Shah has been dethroned and we still do not know whether the situation will develop to a crisis level in this country or not.

It is characteristic of what some sociologists call "explosive degeneration" in human relations—and we have watched it sometimes in our own industrial relations at home—and it naturally raises the 64,000-dollar question: Where and when is the next explosion going to take place and what next will blow up in our faces? It also raises, to my mind, the most uncomfortable question: What about the treasure trove of small arms, light tanks and the apparatus of civil war generally which has now got into the hand of factional mobs? Where will it turn up next as the Middle East equivalent of Chileans available for the purposes of the world's arch-trouble maker, the Communist Party, the servant of Russian Imperialism? I cannot pursue these questions, though it may be for others to do so.

I want to turn to the immediate prospects. Iran produced approximately 10 per cent. of the world's supply of crude oil. When I say "the world's" I mean the WOCA countries—the world outside the Communist area as it is usually abbreviated. The actual estimates for this year were 52 million barrels for WOCA of which 5.4 million were from Iran, which is close to 10 per cent. Of that estimated production for the 12 months (let us say) from 1st November to 31st October this year, four months' production has been irretrievably lost. That is one-third of 10 per cent. which is 3.3 per cent. We must not suppose that during the remaining eight months the Iranian oilfields will be running at 100 per cent. of their rated capacity. If it is at 75 per cent. for eight months, that would add another 1.7 per cent. to the world's loss which will bring the figure up to 5 per cent. overall. Something like this, give or take a few percentage points and give or take any alteration in stock levels, seems to have been the basis for the IEA request that all its members should try to achieve a 5 per cent. economy.

Nearly all equipment can be driven about 15 per cent. above its rated capacity if the will to do it is there. But if you are a world primary producer, 15 per cent. above rated capacity means a raid on your oil reserves. It means depleting your reserves in order to maintain Iran's. This raises the whole question of whether the other Middle East oil producers are going to be willing to do so. They are becoming increasingly sensitive to the implications of running down their reserves—for many good reasons as it appears to them. Some of the reasons for the utilisation of oil that appear good to us appear trivial in the light of their rather more austere Koranic-based faith; and it is understandable that they would not wish to run down their reserves for purposes of ours which seem to them frivolous.

That we must take into account in our reckoning. It is not necessary to go far off Araby to consider the implications of running down local reserves, for our reserves are local to us. North Sea oil and North Sea gas will not be there for ever, and I am much concerned about what I call the "squandermaniacal" depletion of our reserves of North Sea gas due to extremely unwise drawing of the contracts with the oil companies in years gone by. That is another topic and I shall not explore it in depth this afternoon.

Conservation, economy and the use of alternatives: it is a good opportunity to practice all of them. It seems to be very topical that British Aerospace is holding an exhibition of all these technologies upstairs on the Committee Room floor this afternoon, and I hope that as many of your Lordships as can find the time will go and see the very interesting exhibits that they have collected there.

I seem to have recruited some massive heavy artillery in the debate this afternoon, many of whom are specialists in their own subjects. The only casualty I am sorry to say—and I am sure your Lordships wish him well on his sickbed—is my noble friend Lord Hinton of Bankside, who unfortunately is laid up with influenza. I wish he was here this afternoon to take us all to account for our errors of omission and commission in the field of fast reactor installation and the initiation of inquiries into the safety of fast reactors. I am not going to wander too far from my own field by going into that in detail.

It is high time for the Central Electricity Generating Board and the Government to stop playing hide and seek over this inquiry and get down to brass tacks. I know exactly what the noble Lord, Lord Strabolgi, who is answering for the Government, will tell me, because he has said it to me before in answer to questions. He will say that when the CEGB say they want a power station and a fast reactor for that power station, then the Government will initiate an inquiry. That is his standard answer on this point. I must tell him now quite frankly on the Floor of the House that I do not think that is good enough. We ought to anticipate the need by launching the inquiry into fast reactor safety now, and we ought so far as possible to spike the guns of the conservationists by making it quite clear that the prototype commercial fast reactor will go down at Dounreay where the local inhabitants want it and the environmentalists can make the least amount of trouble. If we do not do that this whole project is liable to compete in historical interest with the abortive expedition to Walcheren, which your Lordships will remember from your school days was lampooned as follows: Lord Chatham with his sword drawn, Stood waiting for Sir Richard Strachan. Sir Richard longing to be at'em, Stood waiting for the Earl of Chatham". With a divided command there was nothing left but to go home, and that is what they did. I would produce an up-to-date version of this if I could find anything to rhyme with "CEGB". If there is a poet in the House—and I am sorry that the noble and learned Lord, Lord Hail-sham of Saint Marylebone, is not in his place—perhaps he would get his pencil out and give me some help.

Then we come to the immediate problem that we have to worry about, which is prices and incomes. We cannot pre- tend that we are beginners in this game. We are not even drowning men coming up for the third time. This is our fifth appearance. It started with the Suez war, and then there was the Six Day war, the Yom Kippur war, the 1973–74 OPEC raid on oil prices and now the dethronement of the Shah. We cannot suppose that North Sea oil will escape this same rise. We are not free to treat North Sea oil as the exception to the world's price structure for the very simple reason that a great deal of our North Sea oil is traded off abroad to pay for imports because it is of a higher quality than we need for our domestic requirements in this country. We can buy oil abroad at world prices cheaper than North Sea oil and sell North Sea oil at a premium; ton for ton, barrel for barrel, we gain on the exchange. But it must take place at world prices.

It is perfectly true that oil itself is only 3 per cent. of the world's gross national product. I suppose I ought to call it gross terrestrial product or something like that. Gold is very much less. But think what a rise in the price of gold does, my Lords—and oil is sometimes called "black gold". It enters into the price of everything; it helps to control the price structure. It is part of the servo-mechanism that drives the economy along. If we allow that to get out of control, we are going to be in for another bout of leapfrog inflation on top of the leapfrog inflation that we have not yet damped out of the system.

This is why I have to ask myself: what actually happens to an economy that faces this kind of alteration in its terms of trade? I imagine for purposes of simplification that I have a trading economy which is in a state of internal and external equilibrium. By that I mean that, internally, net income balances the output of consumer goods at full employment, investment balances the output of capital goods at full employment and exports equal imports. What then happens if there is a rise in the price of imported raw materials? Any of three basically different things can happen. First of all, you can borrow the difference, but you cannot keep that up unless you can find foreign investors who will transform short-term trade indebtedness into long-term investment. If you can, well and good, you can borrow the difference. The alternative is that more of the standard products of the economy are exported to pay for the increased drain on resources represented by the same volume of imports at a higher price, thus leaving a smaller amount of consumption goods available for consumption in this country, thereby reducing the standard of living. You find prices going up and you do not ask for more wages to pay for them, you just buy less.

The third remedy is that you can work harder or longer or, much more important, more productively, to turn out an increased proportion of goods to pay for the increased monetary volume of the imports. The one thing you cannot do is to say: "I do not want my personal standard of living to be reduced, so I shall pick my neighbour's pocket. It is true that not being a professional pickpocket, I lack the legerdemain to do this in the literal sense of the word. It is much easier for me to do it by beating him to a price rise." My Lords, this is not a viable way of coping with an alteration in the terms of trade. It only generates the leapfrog inflation from which we are already suffering. If you want a picture of what happens under these conditions, my Lords, just look around you in this winter of our discontent and consider the morale of the nation just at this point in time.

Can we in any sense of the word equate barring the road of the Good Samaritan with a picket line for the sake of more money with loving one's neighbour as oneself? What starts as theft ends as a deterioration in the entire morale and morality of the nation. Trying to beat inflation in this way is like trying to step on your own shadow. It cannot be done. It is quite true that in a Christmas pantomime Peter Pan did something rather like it; but Peter Pan was just a little boy who would not grow up. He is not a model for national leadership, political leadership or union leadership.

I am not one of those who think that the unions are big bad wolves. If I wanted a Disneyesque comparison I would much sooner choose Mickey Mouse as the Sorcerer's Apprentice—the little fellow who switches on more power than he knows how to switch off. If I seem to be laying about me and selecting the unions for the rough edge of my tongue, that is only because in a debate on a restricted subject they happen to be the most relevant. If I really wanted to get rough, I should get rough with everybody including myself for all the sins of omission and commission for which the Legislature has been responsible during the 30 post-war years.

It comes down to this, as I see it: we do not have to be cold, hungry and unemployed before we come to our senses in facing situations that we have faced before and have no excuse for not recognising. But, if that is the way we insist on having it, that is the way it will have to be. With your Lordships' permission, I can describe that situation and what we have to face with a very slight paraphrase of a couple of quatrains by Rudyard Kipling: This was none of the Lord's good pleasure For the Spirit God set in man was free. But what comes after is measure for measure And not some fate that afflicteth thee. As was the sowing, so the reaping is now and evermore shall be. We are delivered to our own keeping: not oil but ourselves have our fate in fee".

My Lords, I beg to move for Papers.

3.31 p.m.


My Lords, the Motion of the noble Earl was indeed drawn very wide and, although he called it "a restricted debate", in a speech full of evocative and impressive analogies the noble Earl has acted as a very genial compère and bas ranged very far. In particular, he has addressed himself to some financial implications. I wish to try to be selective and intend therefore to concentrate on the immediate problem of the shortfall of oil exports from Iran, which I do not believe justifies one part of the noble Earl's Motion where he talks about: … the need for revising the current provisions of the energy programme …". I think what has happened is a timely reminder that we should not forget the lessons of 1973. At that time I said in one debate in this House that OPEC had done us a favour by pointing up the dangers of profligate waste— "squandermania" was the noble Earl's word—of the world's valuable resources and the implications of this for us nationally. I take very small comfort from the fact that if we have not learned the lessons, it appears that the United States have learned them even less well and they are now more dependent on imported oil and continue to use one-third of the world's output of oil; so the energy gap is widening.

There is no doubt that recent events in Iran present a problem. I do not think they present us with a crisis unless we lose our heads and panic ourselves into a crisis; but we are in a state of what might be called "yellow alert". I am sure that the noble Lord will give us more authoritative figures, but the figures I have been able to obtain might put the thing in context, as indeed did the noble Earl. The total world demand for oil is of the order of 60 million barrels a day, or 3,000 million tons a year, of which about 42 million barrels a day is internationally traded. Of that Iran used to produce about 5 million barrels a day. Since that oil was cut off Saudi Arabia has been producing an extra million barrels a day and the North Sea and other sources have been producing another million barrels a day, leaving us with a net shortfall of the order of 3 million barrels a day, which is about 5 per cent. of international consumption. Of course, this does not operate the International Energy Agency's 7 per cent. trigger, but the participants in the International Energy Agency have agreed to a 5 per cent. cut-back, and I think we have agreed, under the nondiscrimination agreement, that this Government will honour their obligations under the IEA. I hope that perhaps the noble Lord will be able to confirm that this is indeed the Government's position.

Having said that, can the noble Lord tell us what ideas the Government themselves may have about implementing a 5 per cent. cut? The Government themselves use something like 30 per cent. of the energy of this country—that is, the Government and Government-controlled agencies—so they can have a very considerable direct influence on this situation if they wish. It has been suggested, for instance, that more coal should be burned in power stations, but my understanding is that something like seven-eighths of the energy used by the CEGB is already coal; so there would not appear to be any great scope for increasing the utilisation, unless it be by reactivating some of the older and relatively uneconomic power stations which were coal burning— in which case, who is going to pay the CEGB for the extra costs they incur?

It seems to me that the International Energy Agency has proved its worth in these difficult circumstances by producing authoritative figures in an area where reliable information is notoriously hard to come by. I think the fact that they have been able to do this gives one added confidence for dealing with the situation and to be sure that the mechanisms exist for coping with the situation if it gets more difficult.

Both the oil companies and the Government have been mutually satisfied that emergency responses are not yet called for. I hope this does not imply that they have been either complacent or irresponsible. My understanding is that the Petroleum Industry Advisory Council gave this advice to the Government and they therefore said there was no need to summon the oil industry's emergency committee, because that very act in itself might have caused precisely the panic reactions that one would wish to avoid if everybody goes out and wishes to stock up, that is the best way of creating an immediate problem of shortages.

The basic message I am getting is that to make a 5 per cent. economy in our use of fuel need cause no great pain but calls for good housekeeping and careful thought in the interests of everybody. This brings another question that I should like to put to the noble Lord. I rather believe that the British National Oil Corporation—and incidentally may I suggest to the noble Earl, Lord Halsbury, that "BNOC" could conceivably be made to rhyme with "CEGB", but I still have not got any further that that—was set up to have some control over crude supply, among other things. Does the noble Lord believe they are capable of exercising any degree of control, and do they have the supplies to make good any shortfalls?

Having said all this, it is quite clear that in a month or two it may be necessary to reconsider where the energy supply situation has arrived, if by that time we have neither achieved a cutback in use nor a revival in production from the Iranian oilfields up to the order of, say, 3 million barrels a day—or at least a prospect of that happening. This problem is something which would necessarily show itself in a serious manner only in the autumn, when the industry's normal practice is to build up stocks through the summer for use during the winter months. I should like to ask the noble Lord, Lord Strabolgi, whether he can give us authoritative figures.

My understanding is that stocks have come down from something like 70 days to about 60 days, which has to be compared with what I believe is our IEA obligation to maintain 90 days. Also, one has to bear in mind that the companies say that they need something like 50 days' stocks to avoid running into technical problems of local shortfalls. Here, again, can the noble Lord tell us whether the Government are now satisfied that we have reached a rational, sensible basis of comparing what stocks really are? It sounds a very simple matter, but I am told that it is exceedingly complicated to allow, for example, for the oil which is on its way here, the oil which cannot be pumped out of a tanker and that kind of marginal consideration.

I believe it is right to say that the real problems have arisen from oil supplied by the so-called small independents who operate the spot market in Rotterdam. This comprises some 8 to 10 operators sharing, perhaps, 5 per cent, of the market. In the ordinary way, they perform a valuable service at a profit to themselves by living dangerously on the margins of the oil market, and, personally, I do not see that they have any cause to complain when the market conditions turn against them, as they inevitably do, about every five years or so. But one should understand how difficult the price factor has become, and I am told that it has become particularly acute in what are known as the light distillates, which I believe include jet fuel. For example, in October, 1978, the price of jet fuel was 162 dollars a ton on the spot market. In February, 1979, it was 320 dollars a ton, which is very nearly double. The United Kingdom price is 220 dollars, which means that you cannot go out on to the spot market to make up any temporary shortages.

This, in turn, points up another problem, which is the dangerous rigidity that price control mechanisms can impose upon this very highly organised and complicated market, because the only recourse that spot market operators would have would be to buy their oil expensively and to sell their oil expensively, rather than say that they cannot supply at all. I suspect it is this which is the background to the reports in the newspapers about what one might call the Walsall school syndrome, where schools have actually had to be closed because of shortage of fuel supplies.

I know nothing about this, but what I suspect has happened is that, in a laudable attempt to keep down the prices, these consumers bought from the small operators at a price below that which they had to pay to the majors. Then the small operators were unable to supply and, of course, when they went back to the majors, they were unable to help, because the majors were saying: "We can lust get by if we continue to supply our longstanding customers, which we believe we shall he able to do with careful management and by resort to such devices as monitoring what they had last year, as compared with what they are ordering now to make sure that they are not trying to take advantage of a shortage situation." This may be a harsh lesson in economics, but it seems to me to be the real world and not necessarily a wholly bad one, from which we, again, should learn the salutary lesson of the precarious balance within which the energy industries operate; and we should pay particular attention to the need for careful husbandry.

This brings me full circle back to something which we have said so often in this House, that I hope that this experience, assuming that it does not get any worse, will emphasise for us the need for systematic energy saving in both the short-term and the long-term, and I can assure the noble Lord that we on this side will give the Government all possible support in any really sensible schemes which they are able to bring forward. I draw comfort from the situation when we find that the IEA has demonstrated its usefulness, despite, incidentally, the apparent anomaly of having its head office in Paris when the French themselves are not members of the IEA. Nevertheless, it has proved its usefulness and its credibility. I also draw the conclusion, along with the noble Earl, Lord Halsbury, that we in this country have to recognise that we cannot isolate ourselves from the world, even although we are faced with the uniquely happy prospect among the industrial nations of the world of an approaching energy balance. If the world is short of energy, we shall feel it here.


My Lords, before the noble Lord sits down, may I ask whether he can tell the House approximately how many of the power stations in this country are run by oil? My information is that they produce about 10 per cent. of the energy which the Central Electricity Generating Board generates. Some of these stations have been constructed for dual firing, and could there not be some saving if the dual firing ones were turned over to coal?


My Lords, I think that I really ought to leave an answer to that question to the Government, when the noble Lord replies. However, I shall say two things which I believe to be correct, and I am sure that the noble Lord, Lord Strabolgi, will correct me if I am wrong. First, I do not believe that any of the dual firing stations have used oil for a very long time. Secondly, the figure which I produced was that something like seven-eighths, which I suppose is something of the order of 85 per cent., of the fuel used by the CEGB is coal rather than oil. There might be some correction factor to be brought in, if the noble Lord is talking about the amount of power produced, for the relative efficiencies of the older and the newer stations.

3.48 p.m.

Viscount THURSO

My Lords, in gratitude to the noble Earl, Lord Halsbury, for introducing this Motion to your Lordships' House, I should like to offer him the poem for which he asked: The Chairman of the UKAEA offered to start the CFR today. The Government said Let us wait and see. This also goes for the CEGB'. We must indeed be grateful to the noble Earl, Lord Halsbury, for drawing the attention of your Lordships' House to this most important matter, that of the need to look at the energy programme in the light of recent events in Iran. We should also congratulate him on the felicitous timing of the debate coming, as it does, like a douche of cold water the day after the publication of Energy Paper No. 33. Although we congratulate the Government and the sensible people of this country on having achieved a saving of 6 per cent. in energy consumption, we must at the same time recognise that we have lost 6.6 per cent. of our total energy supply temporarily, and there is no guarantee that we shall get it back or even a sizeable proportion of it.

The noble Earl, Lord Halsbury, does us a service in asking us to consider our energy programme in a worldwide context. Too often we are inclined to think in narrow, national terms, forgetting how quickly and severely we can be affected by international events. It is true that at this moment we are very nearly energy self-sufficient, but this has not always been so and we know full well that this happy state cannot last. We also have to be aware that, though we have ample reserves of coal, oil and natural gas, this is not true of many of our partners in the EEC. Nor do I believe that it is true of Europe as a whole.

Certainly if we turn our eyes outward to the wide world we should be able to see that if the just demands for an improvement in the standard of living, to even a fraction of that which the West enjoys, are to be met, it does not appear that there is enough energy capacity in the whole world to achieve it. This makes me wonder what proportion of the erstwhile Iranian oil production will ever find its way back to Western markets. Do you remember Argentinian beef, my Lords? Before the war it was the staple source of the "Roast Beef of Old England". Now we hardly see it, except as tinned corned beef. The reason is not a fall-off in demand in this country; it is the result of an increase in demand in South America itself.

What the events in Iran should make us realise is that the days when we in this country, or in Europe, or in the West could look for unlimited supplies of reasonably priced imported energy are over. Energy, from now on, is always going to become scarcer and more expensive. It follows, therefore, that more and more power will reside in the hands of those countries which possess large energy resources, power which may not always be exercised benevolently towards us in the West.

So if we want to preserve our standards of life or, indeed, if we want to preserve our freedom and independence of action, we must see whether it is possible to supply our energy needs largely independently of overseas resources. I think that it will be possible to do this, and I am comforted by the thought that North Sea oil will give us time to make our strategic dispositions. But I am frightened by the very real danger that we may sit around for too long trying to make up our minds about our chosen strategy. The only thing I can think of for which to thank the Ayatollah Khoumeini is that his coup has made us once again concentrate upon the real problems in hand.

I think that up to now I may well have carried my colleagues on these Benches along with me, but I fear that it is at this point that I may be parting with some of them in thought. Certainly I agree that conservation of energy is very important, but recent events have shown that, with the best will in the world, it can contribute only slightly to the solutions to our problems. I applaud the success so far, and I should like to encourage the continuance of the programme. But the ultimate saving of 40 million tons of coal equivalent is less than the built-in energy gap of 50 million tons of coal equivalent which is built into the Green Paper calculations.

I do not, however, share the views contained in the publication A Low Energy Strategy for the United Kingdom, quoted in the recent debate on energy in your Lordships' House, nor do I share the starry-eyed optimism of those who hope to find solutions in alternative energy sources. As more work is done on these, it becomes ever clearer that not only will they be unable to produce the volume of energy needed to fill the energy gap but also that such energy as they may be capable of supplying will be immensely expensive.

There really are only four main sources of energy available to us out of which to fashion an energy strategy to take us into the next century. These are oil, gas, coal and atomic energy. Oil and gas are the energy sources of today and the next decade, but after ten years it is pretty certain that our supplies of them will be declining. It is important, too, to remember that oil and gas are important chemical raw materials and should not be burned up with profligacy. Coal is an energy resource of today and tomorrow and, indeed, for a long time ahead; but we must remember that coal also is an important raw material, and as oil and gas are used up coal may well be needed as a source of chemicals or even to be turned into oil and gas. There are also practical limits to the development of coalfields which may place certain constraints upon us.

Atomic power is the one source of energy capable of meeting our needs, both in volume and in price. Of this I am absolutely and clearly convinced. This, I fear, is where I part company with a number of my colleagues. In my own view, this country cannot afford any longer to hold back from a considerable and progressive investment in atomic power. I repeat that it is the only source available to us which will meet our needs in time, in volume and in price. If we hesitate much longer, it will not be in time, although it still might manage the volume and the price. The gap in timing, however, might well then have to be expensively bought.

Let me substantiate my claims. I said "in time", but there is only just time if we proceed at once with both thermal reactors and the fast reactor programme to achieve a balance of energy by the year A.D. 2020. If we do so proceed, we can look forward to ending uranium imports after about A.D. 2040 and our children and our grandchildren would then be able to enjoy our reserves of degraded uranium which would be equal to our total present coal reserves, if used in fast reactors.

I said "in volume". This is incontrovertible. I do not claim, though, that atomic power would solve absolutely all of our energy needs. Portable energy may well have to be provided still by forms of spirit or gas which could be distilled from coal electrolysed from water and so on. We shall look forward to hearing later in this debate from noble Lords with much greater scientific knowledge than I possess who I am sure will give us chemists' and other scientific views of these possibilities. It is, though, incontrovertible that atomic power is the only source of energy actually available to us now in this country and in the EEC which can be expanded enough to meet our future needs. In it we led, and perhaps in certain areas we still lead, the world. We have the know-how and the resources to develop it.

I said "in price". Here, if we take today's prices, it can be shown that electricity produced from coal costs 1.23p per unit, from oil 1.42p per unit and from nuclear energy 0.76p per unit. There is no doubt that at today's prices atomic power is much cheaper than power from other sources: almost half the cost of power from oil, rather less in the case of coal, provided one is assuming the use of low grade coals in power stations. "Ah, but", you may say, "do we not have to import uranium?" Yes, this is true, for a short time—for a start and for a start only. If we go for thermal reactors, with a fast reactor series ordered in the mid-1990s, then the cost of imported uranium would peak at between £400 million and £800 million per annum.


My Lords, I have listened with interest and have been stimulated, but in all these analyses of costs is the noble Viscount taking into account the cost of making safe all the effluents from this excess radioactivity?

Viscount THURSO

My Lords, I believe this to be so, because I am using Government figures. I do not think that the cost of making safe the effluents is great and in fact personal knowledge which I have of these matters, in which I have an interest—as noble Lords who read the Sunday Telegraph will be aware—leads me to believe that it could be a very easy thing to do. But as I have said, the cost of imported uranium would peak at between £400 million and £800 million per annum and would fall away steadily to nought by about the year 2055 AD.

We are like a human body which has suffered a series of warnings by heart attacks of an inherent circulatory disorder: the Suez crisis was our first heart attack, the coup in Iran was the latest. Like a person who ignores a heart attack we ignore these warnings at our peril. Now is not too soon to take the decisions which will avoid another, and possibly much more serious, attack.

4.1 p.m.


My Lords, I will resist the temptation to follow the noble Viscount in his argument, not because I fundamentally argue that we have not only to consider nuclear energy, or any other kind of energy, but to consider every kind of energy if we are aiming for consistency in our programmes. I am exercising a very strong self-denying ordinance because I happen to believe in wave energy, I happen to believe in solar energy, and incidentally I happen to believe in thermal fusion energy and not so much now in the plutonium economy—but nevertheless, I shall confine myself to the need to find alternative sources of energy, and within that to one alternative, namely, oil from coal. I do that because we have made ourselves hostages to liquid fuel in the internal combustion age. I can think—and we can all think—of all kinds of ways, including marvellous expeditions into the ultimate hydrogen age, but we are still stuck with the fact of machines for which we still have to find liquid fuel.

Like the noble Earl, Lord Halsbury, I should like to ask your Lordships' indulgence in quoting something which I wrote 45 years ago in my first book, The Birth of the Future. I do it without any basic apology because—well, just listen: The need for a national plan is obvious. It must include the mines in the corporate industries. A far-seeing Government would set up carbonisation plants (for smokeless fuel) in the depressed areas which would convert the coal at the pithead. It would set up oil-from-coal distilleries, erect factories which would form the basis of the bakelite industry,"— and I want to explain there that in those days "bakelite" was used as the generic term for what we now call "plastics," and was nothing to do with the trade name— and gas grids in order to commercialise the rich surplus gas. Another method (apart from the conversion of coal tar) of producing oil and motor spirits from coal is by pulverising the coal and hydrogenating it; that is pumping in hydrogen at high pressure and at high temperature. Experiments on a large scale and now capable of commercial output, have been carried out by the Imperial Chemical Industries. In five years the estimated cost of producing petrol from coal has been reduced from 2s. 6d. per gallon to 7d. a gallon". I am talking now about 1934, and I leave your Lordships to do all the conversions from the old currency and indeed in terms of inflated prices today. I continue: The Imperial Chemical Industries, with Government assurances of an adequate tax on imported petrol, is going ahead with a plant capable of producing 100,000 tons of petrol a year—that is 30 million gallons—for a start. The coal consumption for that will be 350,000 tons of coal a year, which is about one-half of one day's natural production. The plant will cost about"— now wait!"— £2½ million". Now multiply that by all the zeros that your Lordships have in your pockets! Then I say: On that basis two and a half weeks' output would supply the 10,500 million tons of coal required to supply the 1,050 million gallons of motor spirit imported into this country every year. 1935". That was written 45 years ago with the insight of the Government Fuel Research Station under Dr. F. S. Sinnatt and of the ICI. But it did not work that way at all. Why did it not work? The story in Germany was enormously different, but nevertheless had a deplorable outcome. Hitler was planning a war and he bided his time until 1939, and we know that he was waiting for the assurance that Germany was self-sufficient in oil. They had no natural oil resources but they had to rely on being self-sufficient in oil, and he was waiting for the culmination of the hydrogenation process first suggested by Bergius in 1914, and it gave him what he wanted.

I would remind your Lordships that the mighty German war machine, the total blitzkrieg, all the bombing of London and everywhere else and all the submarines that took to sea, were all running on oil produced from coal. After Hitler's failure to reach the Baku oilfields and the bombing of Ploesti in the Romanian oilfield in May 1944, Germany became entirely and completely dependent on oil from coal from Leuna chemical works in Germany. If you read Albert Speer you will realise just what that amounted to. By the time we bombed, first of all, Ploesti, Hitler had been stopped short of the Caucasus so he could not get any oil there; but from the production of oil from coal the Germans went on from May 1944 until the whole German war machine ground to a halt for lack of petrol in the Battle of the Bulge. And Speer will tell you in his book—I will not quote it—that the fact is that the first attack on Leuna airfield was the end of the war for Germany. He knew what was going to befall then.

We are talking about something that somehow has got lost in history. Here is the biggest demonstrable commercial development of oil from coal, and we are still talking about it as though it is something to which we must find new answers. There are no new answers necessary. We in this country are making evaluations under the NCB, and so on, about better and more efficient processes. We have three main ones now under consideration and one is the liquid solvent extraction—and I may say that as recently as 1960 a Governent committee on coal derivatives said this in Cmnd 1120 (1969)—and I want to repeat it: Even a cursory inspection of cost data shows that hydrogenation of coal is a less economic route to oil synthesis. Moreover hydrogenation calls for specially selected coals of low ash content; therefore we shall not consider, in this report, hydrogenation as a possible method of making oil from coal".



My noble friend ought to read that again, my Lords.


My Lords, I have not the time to repeat it; I am very scrupulous about time. But this is important. We said it in 1960. We are now unsaying it in some way, but what we are talking about is something which is manifestly so. We have heard the recitation from the noble Earl, Lord Halsbury, of five forgotten chapters, or five warnings, whatever it was. We have had these warnings. What worries me is that we are going to walk into the snare and delusion of atomic energy, in the sense that we are going to accept this as a panacea without alternatives. But the worst thing I can possibly conceive is that we are going to be lulled again into a sense of security by North Sea oil. The only reason why we are in this mess is that oil was cheap. The whole thing happened in the 1930s. Why did we not go ahead with oil from coal? Because oil from the Middle East was cheaper. We got ourselves trapped. I do not want to see us trapped again. If your Lordships want any more alternative sources of energy, I will give them, but let us concentrate at least on one thing —oil from coal—which has been here valid and real, for 45 years.