Futures Align

Early in spring 1961, thirty-nine-year-old Pierre Wack arrived at Khana Junction, a West Bengal railway station.Footnote ³⁷ The line was built in the 1850s to transport coal from northern Raniganj, where the British East India Company had mines.Footnote ³⁸ Wack was there to extract a more profound resource: enlightenment. His journey had begun in wartime Paris, when Azerbaijani mystic George Gurdjieff reputedly cured Wack's tuberculosis. He had since sought other gurus, travelling to the Soen Roshi of Japan's Ryūtaku-ji monastery and to Satipatthana temples near Rangoon.Footnote ³⁹ By 1961, he was on his way to Swami Prajnanpad's Bengalese ashram. A physicist and psychoanalyst, Prajnanpad fought the Raj in the 1920s before committing to Hinduism.Footnote ⁴⁰ Wack was impressed by him and broke his rule of never staying at an ashram for longer than three weeks ‘to avoid being brainwashed’.Footnote ⁴¹ After five weeks of fasting and meditation, Wack believed he had been taught to ‘see’ by Prajnanpad. Darshan is an important aspect of Hinduism, allowing its devotees to both see and be seen by a deity, an act of devotion and means to gain spiritual insight.Footnote ⁴² Wack considered seeing ‘a function of pure consciousness’, a skill that offered him something like objectivity, a means for ‘not believing, speculating, or imagining, but seeing’, for directly perceiving reality.Footnote ⁴³

Wack was no typical hippy. On his return from India, he began working at Shell Française, a small part of the broader conglomerate Shell International, which encompassed 300 sub-companies and 170,000 employee.Footnote ⁴⁴ Wack's role was to produce forecasts about oil. Forecasts generally used econometric methods of the kind he had studied in Heidelberg and Frankfurt before the war, but which he came to believe were insufficient.Footnote ⁴⁵ Wack's scenario method was essentially a spiritually-informed type of descriptive systems analysis.Footnote ⁴⁶

Prajnanpad was not Wack's only guru. In 1965 he travelled to Southern California where he met physicist and futurologist Herman Kahn, infamous for developing the nuclear strategy of ‘mutually assured destruction’.Footnote ⁴⁷ Having left RAND Corporation in 1961, Kahn formed the Hudson Institute to sell RAND's methods to corporations. Shell was an early client.Footnote ⁴⁸ Kahn, a larger-than-life character, was known to give three-day seminars in which he was the only speaker.Footnote ⁴⁹ In his new guise as corporate seer, he promoted a forecasting approach in which statistics were replaced by ‘metaphors and historical analogues’.Footnote ⁵⁰ He promised clients that futures could be actively constructed rather than merely awaited.Footnote ⁵¹

Edward ‘Ted’ Newland, a former RAF pilot turned oil executive who oversaw Shell's Nigerian operations, was another influence. Wack first met him at a Hudson Institute meeting in the mid-60s and the two soon became close collaborators at Shell's futurological ‘Group Planning’ department.Footnote ⁵² There, Newland called for an in-house study of the company's prospects up to the year 2000, imitating Kahn's approach.Footnote ⁵³ Around this time, Wack had developed his first scenario, a two by two matrix which set out four possible outcomes from the imminent Treaty of Rome for France's methane supply.Footnote ⁵⁴ Newland's more extensive report suggested oil-producing nations were becoming increasingly assertive and might nationalise their oil and new fuels might threaten oil's supremacy. The study encouraged Shell to diversify into coal and nuclear power.Footnote ⁵⁵ Newland's report also set out the fundamental problem of future energy demand. By 2000, he predicted that 110 million additional barrels would be needed daily to meet global demand.Footnote ⁵⁶ Newland's report stressed the improbability that industry could achieve this without provoking geopolitical tensions.

Realising Scenarios

Wack joined the Group Planning team's central London office in 1971. An opulent tower on the banks of the Thames, the Shell Centre had air-conditioning, an Olympic-sized swimming pool, and its own theatre.Footnote ⁵⁷ One of the Frenchman's first tasks was to read a pre-publication version of the Club of Rome's Limits to Growth. After another spiritual sabbatical in Japan, Wack returned with a looser approach to forecasting than the Limits methodology.Footnote ⁵⁸ Rather than civilisational ruin, Wack focused on obvious facts bearing upon the oil industry's future. Foremost was the daunting scale of forecasted rates of demand, second was that ‘governments everywhere’ were becoming ‘increasingly concerned to regulate the operations of oil companies’ to ensure profit and sufficient supply.Footnote ⁵⁹ On the basis of these two fundamental facts, Wack formulated three likely scenarios for the future of oil that he presented to fellow executives in June 1971. These ranged from (i) a ‘surprise free’ scenario that predicted continued increases in oil demand, and which would mean producers’ tax take would increase threefold by 1975, (ii) a ‘crisis’ situation in which demand would slow due to producer tariffs and rising oil nationalism, (iii) a scenario in which coal and nuclear energy would eventually outpace oil supply. Despite the gravity of all three scenarios, the presentation did little to stir his colleagues to action.Footnote ⁶⁰

To hone their powers of persuasion, Wack and his colleagues at Shell retreated to a monastery in Lurs, France. There he and Newland decided to persistently frustrate Shell's senior executives over four or five days, so that tensions grew to a breaking point and, so Wack believed, they could sway the executives’ subconscious minds to see the logic of their scenarios (i.e. a strategy used by cults).Footnote ⁶¹ This monastic brainwashing revealed the ‘crisis’ scenario generated most interest amid the executives. Wack later noted with satisfaction how Shell's leadership had ‘decided to warn Consumer Governments so that they could anticipate the way in which the situation might evolve and take appropriate proactive measures’.Footnote ⁶² Shell was not alone in pre-empting a crisis; other companies issued warnings about imminent shortages to the governments of oil-consuming nations, a logical fear given OPEC's growing strength.Footnote ⁶³ Like other forecasters, Shell's aim was not to predict the future so much as curate it.

Before Lurs, Shell's future had been largely dictated by the past. Since 1965, executives had used a forecasting system termed the Unified Planning Machine (UPM), an econometric model which extrapolated from past performance and used calculators and paper ledgers to map out six-year trends in oil prices.Footnote ⁶⁴ Despite senior management's confidence in UPM, it could not account for unexpected events. It had no means to predict the emergence of OPEC in 1960, for instance. In forming a production cartel this organisation had unexpectedly imitated the United States’ approach to restricting domestic petroleum supply, which dated back to the 1930s.Footnote ⁶⁵ OPEC wanted to implement ‘global prorationing’, in which developing petrostates would limit production so as to reclaim sovereignty.Footnote ⁶⁶ Newland had implemented in-house scenario planning to better anticipate such incalculable threats.Footnote ⁶⁷ For example, chemist and later Gaia-theorist James Lovelock wrote a high-pollution scenario for Shell in 1966 which predicted an arms race in which ever more energy resources would be necessary to fight the worst effects of energy-related pollution.Footnote ⁶⁸

Among Shell's futurologists, Wack stood out because of his mysticism.Footnote ⁶⁹ In September 1972, he gave an impassioned presentation to senior management which upped the stakes of scenario (iii), that of ‘crisis’. He warned of an imminent ‘major discontinuity’ in the oil market. The various directions the future might take were depicted as a branching delta (Figure 1). The main branch, indicating ‘energy availability’, would split in two if a supply gap occurred, which Wack predicted around the time of a planned OPEC meeting in 1975.Footnote ⁷⁰ This would lead to three possible outcomes: private enterprise would be left to address energy scarcity alone; a dirigiste solution would become necessary; or a third possibility was that the state and market would solve the long-threatened ‘energy crisis’.

Figure 1. River Delta illustration of energy scenarios: WACK Shell Group Planning (1974) Scenarios for the 1975 Planning Cycle: Restricted. Group Planning, Oct. 1974.Footnote ⁷³

These three possibilities were published internally as ‘Scenarios for the 1973 Planning Cycle’, and were internally circulated in late 1972.Footnote ⁷¹ Wack's colleague, Napier Collyns, then oversaw a more extensive report based on this scenario titled The Impact on the World Economy of Developments in the Market for Oil, known informally as the ‘Pink Book’.Footnote ⁷² This publication expanded upon the consumer-end of the energy crisis scenario. Again, the central problem was that global oil demand was predicted to double by 1985. Accordingly, the report described a ‘steady shift in power’ underway, favouring oil-producers. Shell feared this power-shift risked a situation in which both oil-consuming and producing nations would impose ‘extreme policies’ to protect their interests. However, the pink book set out means of ‘containing the situation’. Shell could ‘let it be seen not that consumers are completely dependent upon oil and will be prepared to fight with one another to pre-empt supplies, but rather that they have a number of policy options which in the longer term will seriously influence the current competitive position of oil’.Footnote ⁷⁴ Long-term diversification could show that the company would not be held to ransom.Footnote ⁷⁵ In the short-term, it was argued the ‘most significant contribution to saving oil imports could come […] from policies to promote efficient processes and technologies and from measures to reduce the waste of energy’.Footnote ⁷⁶ To weaken the threat of nationalisation, Shell wanted customers to buy less oil.

In October 1973, Wack and others from Group Planning sought allies to implement efficiency and waste reduction policies. They visited the governments of oil-consuming states to persuade them of the likelihood of the Pink Book ‘crisis’ scenario.Footnote ⁷⁷ When the OPEC embargo began later that month, it seemed his prognostications had been correct (if two years early).Footnote ⁷⁸ As Jenny Andersson argues, these scenarios now served to ‘convince both managers and a wider set of trustees in Western governments and publics of the lasting role of the multinational oil corporation’.Footnote ⁷⁹ Specifying this claim, in what follows, we will see how Shell's scenarios, and the solutions they proffered, influenced the British government's conception of the oil situation and delimited their possible responses.

Civil Service Seers

Historian Bretton Fosbrook has questioned if Wack's scenarios really affected Shell's operational strategy. He describes the method more as an artefact of business school education than actual business history.Footnote ⁸⁰ Wack's heretical reputation was actively fashioned ex post facto through avaricious self-promotion and via the public relations acumen of Collyns and the business journalist Art Kleiner, both of whom later specialised in selling ‘new age’ business management books.Footnote ⁸¹ While applauding Fosbrook's deflationary account, Wack's papers reveal that his forecasts did in fact influence the company. Moreover, British government archives suggest the scenario method influenced Heath's political response to the energy crisis, though Wack's role was indirect. In this latter case, Shell's scenarios were influential partly because the government had adopted a similar futurological orientation.

In opposition in 1966, Heath's Conservative Party committed itself to eradicating public sector waste via ‘new management techniques’, and a ‘Public Sector Research Unit’ (PSRU) was set up to apply these techniques to nationalised industries.Footnote ⁸² There executives from Shell International and Marks and Spencer helped formulate ideas for public sector reform.Footnote ⁸³ David Howell, a young PSRU researcher, drew on the work of Peter Drucker, a management theorist.Footnote ⁸⁴ By 1969 Drucker proselytised ‘reprivatisation’ to reintroduce the disciplining forces of market competition.Footnote ⁸⁵ Howell adopted the term to describe the Conservatives’ ‘new style of government’ which, if elected, would involve ‘transferring functions and activities’ of state-owned industry ‘back to the private sector or running them down altogether’.Footnote ⁸⁶ Once the Conservatives were in power, Howell drafted a white paper, The Reorganisation of Central Government, which called for a ‘central capability unit’ to enact reprivatisation.Footnote ⁸⁷

Concerns about the civil service's lack of expertise predated the Conservative's victory. Labour's Fulton Committee, set in 1965, had investigated possible reforms, concluding that ‘new modes of analysis’ drawn from econometrics should be adopted.Footnote ⁸⁸ Burke Trend, acting head of the civil service, was therefore sympathetic to the Conservatives' proposed Central Capability Unit.Footnote ⁸⁹ Howell's proposed organisation, the now more moderately-named Central Policy Review Staff (CPRS), sought to relay methods borne in competitive contexts into the heart of the government.Footnote ⁹⁰

Once in power, the CPRS was staffed by a number of former and seconded Shell employees, foremost among them Victor Rothschild, Shell's recently retired research director. He had studied biophysics at Cambridge and been a member of the Royal Society.Footnote ⁹¹ He had undertaken bomb disposal for MI5 during the war, followed by a Labour peerage in 1945, and then chairmanship of the Agricultural Research Council. In 1959 he joined Shell UK as director of research, becoming research director of Shell International by 1965.Footnote ⁹² The Rothschilds were an oil family, having dominated Baku's kerosene market in the late nineteenth century. In 1901, then rival companies Royal Dutch and Shell had bought the family's Baku concern, and following their 1907 merger, a fiduciary relationship was established between the ‘Royal Dutch Shell’ company and the Rothschilds.Footnote ⁹³ This was lucky timing. A decade later the Bolsheviks seized Western-owned oil concessions in the Caucasus.Footnote ⁹⁴ No doubt his family legacy was useful, but Rothschild's successes at Shell seemed to centre on his aptitude for applied science rather than nepotism.Footnote ⁹⁵ He hired leading researchers, including Lovelock, who wrote the aforementioned 1966 energy study.Footnote ⁹⁶ He also oversaw numerous experiments, from inhibiting seaweed growth on oil tankers to converting water hyacinths into methane. He even used his biological training to advise the Shah regarding Iran's agricultural prospects.Footnote ⁹⁷

As head of the CPRS, Rothschild chose its twelve to twenty rolling staff. It included people like twenty-four-year-old William Waldegrave, Oxford classicist and fellow at All Souls College, Robin Butler, another Oxford classicist whose father-in-law had worked for Shell Research, and Tony Fish, a Shell chemist and strategist.Footnote ⁹⁸ Other figures included Robert Wade-Gerry, another All Souls fellow, Peter Carey, undersecretary for the Minister of Technology, and former Treasury economist Dick Ross. Rothschild liked to joke that the last two were Heath's inside men.Footnote ⁹⁹ A Sunday Times Magazine feature described the organisation as ‘Heath's Brain’ and accurately described its ‘fairly narrow social base of Oxbridge, stars from the Civil Service, and Rothschild's own acquaintances’.Footnote ¹⁰⁰ Later, two former CPRS staff recalled an almost ‘continuous line of CPRS members from one or other of the major oil companies’, whom, it was claimed, gave the group its ‘enduring capability in energy matters’ (Figure 2).Footnote ¹⁰¹ Such was this expertise that, akin to Wack, it was later claimed the CPRS had predicted the oil price rises which began in 1971.Footnote ¹⁰² Or so the story goes. Subsequent historians have pointed out that these price rises were more the result of negotiations between OPEC and major oil companies, a concession intended to dissuade producer states from taking further steps toward nationalisation.Footnote ¹⁰³ Here, on the basis of a close reading of archival sources, it is argued that Shell's intimacy with government enabled the company to communicate its scenarios, specifically one encouraging political leaders to envision a coming ‘energy crisis’ and its resolution through a two-stage form of energy conservation.

Figure 2. Rothschild – left. J. Fox, ‘The Brains behind the Throne’, Sunday Times Magazine, 25 March 1973, pp. 46–56. Photographer: David Montgomery.

Shell hoped to rouse the government on the basis of forecasted evidence. In 1970 David Barran, Shell's head of transport, requested a forecast of the oil industry's prospects up to 1985. Group Planning predicted that global oil demand would double by 1985, and that the company's ‘dependence on Middle East Supplies’ would ‘not diminish for some ten to fifteen years and there is a strong likelihood of a sellers’ cartel for energy developing’.Footnote ¹⁰⁴ A subsequent Group Planning report argued that if this happened, governments would ‘regulate the operations of oil companies in the interests firstly of securing their oil supplies: secondly of limiting pollution and industrial congestion and thirdly of controlling the cost of energy’.Footnote ¹⁰⁵ Here it is argued that Shell's fear of such state-led interventions led its executives to agree that oil-consuming governments should be warned of an impending crisis so they could take actions less detrimental to Shell's interests.Footnote ¹⁰⁶ In September 1971, Barran met Heath to warn him.Footnote ¹⁰⁷ Barran hoped to dissuade oil-consuming states from further nationalisation in response to the growing authority of OPEC. Instead, Shell's proposal was that the company should seek a middle way that avoided overwhelmingly dirigiste state intervention in oil markets, while also avoiding a totally liberalised market in which government did nothing to help them. The ideal scenario was one in which governments would support the continued expropriation of oil from the developing world and its unrestricted sale in the developed world).

Before Heath met Barran, Rothschild had written to Robert Carr, Heath's Secretary of State, to suggest his former employer had similarly predicted unsustainable increases in oil demand, the formation of a cartel, and a resultant energy crisis. Rothschild considered Shell's report ‘dynamite’ and wanted to forewarn Heath. The Treasury and Department of Trade and Industry (DTI), however, were under the impression that oil prices were likely to decrease as new sources of energy supply were found and existing reservoirs were extracted with increased efficiency.Footnote ¹⁰⁸ So, while both Rothschild and Barran had met Heath on 5 October 1971 to warn him of ‘a major world energy crisis between ten and twenty-five years from now’,Footnote ¹⁰⁹ and BP warned likewise, two important branches of British government saw a more optimistic future in which oil would flow and prices would fall.Footnote ¹¹⁰

The oil industry's concerns were long-term. Since 1918, when Russia seized the Baku oil fields, Mexico, Iran, Iraq, Argentina and Peru had all dispossessed the major oil companies through nationalisation. Following OPEC's formation in 1960, eighteen more nations nationalised their oil reserves, which meant around 75 per cent of international oil production was now carried out by state firms.Footnote ¹¹¹ Taking a similarly long-term perspective, the Hudson Institute's 1967 industry survey had argued ‘present dirigiste tendencies in many industrial countries, as well as the major producing areas, cast some doubts as to the degree of profitability of the private international oil business in the longer term’.Footnote ¹¹² That year, following the North Sea oil discovery, Labour proposed a National Hydrocarbons Corporation (NHC), revealing an intent to nationalise this oil as they had coal.Footnote ¹¹³ For good reasons, oil majors feared nationalisation abroad and at home.

Close relations between Shell and the CPRS were not some kind of corporate conspiracy to hoodwink the British government, but an indication of how closely the interests of the oil industry were tied to the state.Footnote ¹¹⁴ For much of the twentieth century the British government allowed Shell and BP, who together met around half of the nation's oil demand, to operate with significant autonomy.Footnote ¹¹⁵ The mechanics of this relation were clearly demonstrated in a briefing Rothschild penned in November 1971, which contained an annotated version of of the Pink Book's arguments. Rothschild's briefing noted each percentage increase in tax take negotiated by oil producers would dramatically affect the United Kingdom's balance of payments, the difference between the currency flowing in and out of a country, and a fixation of government at the time.Footnote ¹¹⁶ As Middle Eastern oil was categorised as ‘sterling oil’, which had to be purchased with pounds, each barrel sold helped sustain the currency's value.Footnote ¹¹⁷ If OPEC took a bigger cut, oil would need to be purchased with greater amounts of sterling, thereby undermining the value of the pound.Footnote ¹¹⁸ Rothschild estimated that a 0.5 per cent increase in oil producer ‘take’ would equate to a £600 million loss in sterling's exchange value. Furthermore, he predicted that OPEC ‘can and probably will increase their take’ further. To limit the impacts of oil price rises, he advocated increasing coal production, speeding up North Sea oil exploitation, and ramping up nuclear power provision.Footnote ¹¹⁹ Heath responded by telling Rothschild that the DTI were producing an authoritative ‘Energy Policy’ study, which would inform policy. Given its pessimism, Heath was concerned that Rothschild's briefing would confuse ministers, so it was shelved.Footnote ¹²⁰ Yet in spring 1972, Heath agreed the CPRS should produce their own energy policy report.Footnote ¹²¹

Contested Conservation

Heath's government now had three groups formulating energy policy: the DTI, the CPRS and another relatively new part of the government machine, the World Future Trends Committee (WFTC). A number of historians have recently drawn attention to the fact that the United Kingdom, contrary to aspersions, was a hub of futurological research in the late 1960s and 1970s.Footnote ¹²² Both major parties had established future studies units; Labour had a ‘Programmes Analysis Unit’ (PAU), and the Conservatives a ‘Conservative Systems Research Centre’ (CSRC) in which Heath's team tested out policy proposals on a linear programming matrix, software run on a time-sharing ‘SIA 6600’ computer connected to the CSRC centre via the telephone network and whose outputs were displayed on a ‘Control Data 210 Video’ unit (Figure 3).Footnote ¹²³ In government, Heath, an underappreciated moderniser, encouraged the formation of the WFTC. Amongst other things, he hoped it could create a British version of the controversial Limits to Growth World3 model.Footnote ¹²⁴ At the first WFTC meeting in July 1972, Dennis ‘Joe’ Lyons, argued that Limits had failed to account for ‘strong stabilising forces’, specifically those potentiated by the market, such as price increases, which could reduce consumer demand or re-direct it toward less scarce resources.Footnote ¹²⁵ In October the Committee proposed the addition of new ‘feedback loops’ representing ‘market forces acting to stimulate substitution’, for reasons we will go into.Footnote ¹²⁶ However, beyond such simulacra, a wave of NUM pickets began in January, limiting coal supplies and leading to blackouts and candle shortages.Footnote ¹²⁷

Figure 3. The Control Date 210 Video Display Unit at the Conservative Systems Research Centre. Photographer unknown. Source: CPA, CCO 20/26/7 CSRC.

What if, as Lyons argued, the market could reduce energy demand via price-driven acts of conservation and substitution? Such ideas were floating around in various forms. In February 1973, Rothschild had travelled to the United States. Immediately on his return he wrote to Heath and William Armstrong, then head of the Civil Service, suggesting the government look into energy-saving policies. He wrote of having been ‘stimulated to suggest this by some knowledge’ he had ‘acquired on holiday about what is going on in this field in the United States’, where he perceived ‘a far more co-ordinated attack on this aspect of the energy problem than there is in the United Kingdom’.Footnote ¹²⁸ From whom had he acquired his idea? His letter didn't specify, but Rothschild's daughter Emma was living in New York at the time, having recently finished a master's degree at Massachusetts Institute of Technology (MIT) with economist Robert Solow.Footnote ¹²⁹ Presuming Rothschild visited his daughter, he would have found her near the completion of a book documenting the decline of the US automotive industry titled Paradise Lost (1973). In it, she criticised the inefficiencies of individual mobility over mass transportation systems, and repeatedly cited a report from the US Office of Emergency Preparedness, The Potential for Energy Conservation (1972), that summarised a spate of recent US National Science Foundation (NSF) funded applied research initiatives that proposed ways to reduce the overall energy demand growth rate in the United States.Footnote ¹³⁰ The report described technological ‘programs which could either improve on the efficiency with which energy is consumed or minimize the consumption of energy . . . while providing the same or similar services to the consumer’ – conservation could come at no cost to utility.Footnote ¹³¹

Rothschild's proposed investigation of US energy conservation research appealed to Heath, who circulated a memorandum stating that government ‘need to put more effort into ways and means of conserving energy’ in order to ‘reduce our present demands for the exhaustible fossil fuels’.Footnote ¹³² As of September 1972, the CPRS had begun to search for imaginative solutions to the coming oil crisis. One idea was the formation an international oil importers’ cartel, ‘OPIC’, to coordinate the policies of oil-dependent nations and avoid their becoming ‘extensions of Saudi Arabia and Iran’.Footnote ¹³³ In that vein, Ian Read, a seconded Shell employee at the CPRS, was selected to investigate energy-conservation policies.Footnote ¹³⁴ A month later he circulated a memo, ‘Why Conserve Energy?’, which argued that policies existed which could ‘lessen the risk that the growth of GNP will be constrained by the availability of energy’, while also defusing the OPEC threat, and obtaining ‘indirect’ environmental benefits.Footnote ¹³⁵ Given such promises, Read was asked to produce a more extensive report on energy conservation by September 1973, a month prior to the embargo.Footnote ¹³⁶

Here it is important to reaffirm the branches of the Heath government that were now working on energy policy. The DTI had published their work, the WFTC were working on a Limits-style model that represented the conservationist capacities of market forces, while the CPRS had two energy studies, their recently-completed rival to the DTI's energy policy study which Heath had sanctioned back in 1972 and Read's conservation study. The first of these reports, An Energy Policy for Britain, completed in May 1973, was clearly influenced by Shell's scenarios. Its prognosis remained dramatically different from that of the DTI, who still predicted falling oil prices.Footnote ¹³⁷ By contrast, the CPRS's recommendations were grounded in three main scenarios of increasing severity. The ‘EASY’ scenario predicted prices might rise from $2.20 to $3.75 a barrel. A ‘SCARCE’ scenario meant $6, and ‘CRISIS’ – a once unthinkable $9.Footnote ¹³⁸ These prices were similar to those Barran had warned of in October 1971, though they were now presented as internal civil service findings rather than those of Shell, and they warned of an imminent crisis rather than one in ten years. As the report circulated, Heath expressed concern about the difference between the CPRS's warnings versus the Panglossian DTI study.Footnote ¹³⁹ The prime minister arranged a private briefing at Number 10 to discuss this divergence. At the meeting, with Wack-ian histrionics, Rothschild told the assembled ministers they must enter ‘the world of futurology’, a speculative place in which oil prices might quadruple.Footnote ¹⁴⁰

The CPRS report was also distinguished by its proposed responses to oil price rises, most of which deviated from the DTI's proposals. Rothschild's report suggested decommissioning of coal mines should halt, exploratory drilling for fossil fuels should be undertaken on land and sea, and power stations should become ‘dual-fired’ by oil or coal. Given that reinvigorating the coal industry would embolden the NUM, a supposed driver of inflation, it was no surprise Burke Trend marked this proposal with the words ‘with all that this implies for economic and social policy’.Footnote ¹⁴¹ Another important distinction was that the CPRS report argued electricity prices should ‘be increased to a level which reflects costs’ as a means to encourage economic efficiency.Footnote ¹⁴² Since 1948, the CEGB had kept electricity below cost in an attempt to control inflation and increase productivity.Footnote ¹⁴³ In calling for cost-based pricing, CPRS took a small step closer towards advocating market-based pricing.

Despite such differences, both the DTI and the CPRS called for increased investment in nuclear power. However, the CPRS suggested the heavily subsidised advanced gas-cooled reactors Britain had invested in should be dropped in favour of ‘market-ready’ light water reactors.Footnote ¹⁴⁴ When it came to North Sea petroleum, the DTI favoured further exploration and the designation of the resource as a nationally-owned commodity, whereas the CPRS wanted a rapidly-formed tax regime so private industry could begin immediate extraction. The CPRS also proposed studies on electric vehicles, tidal and wind power, waste avoidance, and an ad valorem petroleum tax. Overall, the CPRS proposals envisioned a greater role for private industry, as was the organisation's intention.Footnote ¹⁴⁵

The CPRS's proposed energy policies were also congruent with the aims of Shell who, lest we forget, had published an internal document outlining their aim to encourage oil-consuming states to develop an ‘effective long-term energy policy’ for diversification to show OPEC that oil-consuming nations were not ‘completely dependent on oil’ and that they in fact ‘have a number of policy options’ open to them.Footnote ¹⁴⁶ Shell had begun diversifying in 1967, when Newland had first warned of a coming crisis. The company invested in nuclear reprocessing, gas centrifuges for uranium enrichment, a stake in Gulf Oil's nuclear subsidiary General Atomic, fuel-cell research, South African coal mines, and the Billiton mining group. Perhaps most consequentially, investment in exploratory geophysics that diversification afforded helped Shell (in fact ‘Shell-Esso’) to discover the Brent oil field in 1971.Footnote ¹⁴⁷

Energy conservation is an often forgotten aspect of Shell's diversification strategy.Footnote ¹⁴⁸ That an oil company would want consumers to use less of its product may seem counter-intuitive, but as an internal document clearly stated some at Shell believed ‘the most significant contribution to saving oil imports could come from policies to promote efficient processes and technologies and from measures to reduce the waste of energy’.Footnote ¹⁴⁹ By improving efficiency and avoiding waste, the hope was that oil-consuming nations could lessen OPEC's power. The great thing about conservation, as Group Planning's Pink Book later noted, was that its protocols could be both dirigiste, if interventions were deemed necessary, or laissez- faire if not. Regarding the latter, the report explained: ‘the legislator who consciously keeps the price [of energy] down for social reasons should be aware that he is discouraging both the development of new supplies and the improvement of energy efficiency’.Footnote ¹⁵⁰ In the long-term, government interference would impede the price mechanism, which some considered the most effective means of encouraging resource exploration, substitution, and conservation.Footnote ¹⁵¹ Interventionist conservation was presented as a short-term expedient to reduce oil-producing nations’ hold over oil-consuming nations.

Not everyone was persuaded of the benefits of conservation. As Shell advocated its two-stage conservation policy, the CPRS's investigation was stalling. Following an interdepartmental meeting, Read received a letter from Treasury economist George Corti arguing that market-driven conservation would interfere with the ‘test discount rate’, a simulated interest rate which the Exchequer used to estimate the future cost of public spending. If electricity was suddenly priced at rather than below cost, as the CPRS suggested, inflation would rise, forcing the Treasury to revise its entire budget.Footnote ¹⁵² Corti's concerns went unanswered, leading him to express ‘heretical thoughts’ in a more pointed second letter. Allowing the cost of energy to rise as scarcity grew, Corti argued, could not assure future energy supply. Instead, it would limit the government's control over long-term investment in energy infrastructure.Footnote ¹⁵³ Sensing a conflict, Rothschild intervened, assuring Corti that the CPRS's aim was not to move to market-based energy prices.Footnote ¹⁵⁴

Read's work became more urgent in October 1973, when a group of Arab OPEC members, the Organization of Arab Petroleum Exporting Countries (OAPEC), formed in 1968, agreed to cut their petroleum consumption by 25 per cent in response to UK and US support for Israel in the Yom Kippur war.Footnote ¹⁵⁵ This restriction in supply occurred alongside OPEC's earlier price rise agreement with oil majors, and the resulting panic caused a four-fold increase in oil prices.Footnote ¹⁵⁶

A month after the OAPEC embargo, the accuracy of Shell's ‘CRISIS’ scenario seemed irrefutable. Rothschild invited Group Planning head, Jim Davidson, to Whitehall to present the company's suggested correctives.Footnote ¹⁵⁷ On 6 December 1973, Davidson recounted the threat of a crisis, a scenario long touted by Wack and others, but by now a real oil crisis was in full swing, soon to be exacerbated by another NUM strike. Some civil servants were exhausted. Davidson recalled how Armstrong had slept through most of the talk. Only over lunch, Davidson recalled, had Shell's warning finally got through.Footnote ¹⁵⁸

However, as this two-fold energy crisis unfolded, the Treasury and DTI were still operating with an older notion of fuel efficiency, which saw the problem as one in the domain of engineers rather than economists.Footnote ¹⁵⁹ When the CPRS consulted Imperial College thermodynamics professor Walter Murgatroyd he had recommended subsidies for the purchase of energy-efficient machinery as a means to increase the efficiency of British industry. Read, seemingly persuaded as to the benefits of the price-driven approach attributed to US researchers, angrily annotated Murgatroyd's report with the words ‘No! The incentive should be part of [the] pricing policy of the nationalised energy industries.’Footnote ¹⁶⁰

Misunderstandings over the meaning of energy conservation and its causal mechanisms abounded.Footnote ¹⁶¹ Alan Silverleaf, of the recently formed Department of the Environment, complained that reducing speed limits from seventy to fifty miles per hour, as Read's report proposed, would save little petroleum. He believed significant savings were only possible at thirty-five miles per hour. Moreover, Silverleaf argued, orthodox economic theory suggested that any saved fuel would likely be consumed by others unless severe restrictions on mobility or rationing were put in place.Footnote ¹⁶² Alongside this, the DTI's investigation into energy policy had left them ‘confused as to whether there was anything special in energy conservation which made it more desirable . . . than the conservation of, say, food, steel, or building materials’.Footnote ¹⁶³ As oil prices continued to rise, Rothschild was told responses to the CPRS's conservation study had been ‘of varying quality, but in many cases disappointing’.Footnote ¹⁶⁴ As a result, Read's first draft concluded that energy conservation offered ‘no solution to the immediate crisis’ and that consequential savings were only possible with ‘very severe restraints on the public's freedom of choice’, a very un-CPRS-like proposal.Footnote ¹⁶⁵

Market Forces

All was not lost for conservationists. Two weeks before the embargo, Read had been contacted by civil servant Peter Rogers, a fellow CPRS member who also sat on the WFTC.Footnote ¹⁶⁶ Rogers wrote of having produced a ‘first shot’ at a paper on the economics of energy conservation, an exercise he hoped would ‘throw some light on the underlying issue’. Noting the ambiguities involved, Rogers hypothesised that conservation implied excessive rates of consumption. As corrective, he argued ‘models of general price equilibrium’ could show how ‘a properly functioning price mechanism would handle the needs of conservation’, as unrestricted price rises would discourage or delay use, and/or encourage substitution. Better yet, the price mechanism could help consumer ‘anticipation of high prices in the future’. If scarcity loomed, those supplying energy could alter their ‘rate of time preference’, opting not to burn fuel in expectation of greater future profit. Free-roaming energy prices would, it was claimed, act as a kind of forecasting technology, as ‘expectations about the future’ would be ‘reflected in today's market prices’.Footnote ¹⁶⁷ Unfortunately for Rogers, a week later, as miners demanded increased pay, Heath abandoned liberalisation, instituting ‘Stage 3’ of a public sector wage and price freeze. By November, with energy supplies constrained by both foreign and domestic powers, the Government declared a national emergency.Footnote ¹⁶⁸

As disruption raged, a ‘Working Group on Market Forces, Resource Use and Technological Change’ was convened to investigate Rogers’ proposal, with support of the CPRS and the WFTC. Rogers' paper had emerged out of the WFTC's work on Limits and the conclusion that the study had not paid sufficient attention to the equilibrating role of market forces.Footnote ¹⁶⁹ Amongst the investigators, David Owen from the Department of the Environment argued that resource prices should reflect ‘the costs of replacing, in a future period, resources consumed today’.Footnote ¹⁷⁰ He envisioned a sophisticated computational forecasting system based at the PAU in Harwell, the state-funded futurological laboratory, which would calculate a suitable discount rate for forgoing the opportunity cost of consuming a specific amount of a given resource, a value Owen termed ‘replenishment cost’.Footnote ¹⁷¹ The deliberations of the Working Group soon put paid to this idea. Its chair, the physicist Donald Braben – who went on to promote ‘blue skies research’ at BP's Venture Research UnitFootnote ¹⁷² – argued Owen's system of state-calculated replenishment pricing was ‘too inflexible’, and the Market Forces group instead concluded that only ‘a normally operating market would lead to efficient allocation of resources’.Footnote ¹⁷³ Advocates for market-based conservation were growing in number.

Rogers’ claim that market-potentiated ‘negative feedbacks’ could conserve energy and resources seemed to encourage Braben and the Market Forces group make the case for this proto-neoliberal proposal. Where had Rogers got this idea from? One of the few papers cited in his proposal came from economist Harry Johnson of the London School of Economics (LSE). Rogers had written to Johnson's secretary requesting a paper he had heard of ‘criticising excessive concern over the problem of conserving limited fuel supplies’.Footnote ¹⁷⁴ Having moved far from its Fabian roots, LSE was a hub of neoliberal thought.Footnote ¹⁷⁵ Johnson, a neoliberal of the Chicago School, had also advised London's Hayekian think tank par excellence, the IEA.Footnote ¹⁷⁶ The paper Rogers requested from Johnson's secretary (confusingly also named Rogers), ‘Man and His Environment’, had been written on behalf of the British-North American Committee, a Canadian free trade organisation. In it Johnson argued that the price mechanism was conservative.Footnote ¹⁷⁷ In a now familiar formulation he argued price rises would mean ‘oil reserves will be held for future profit rather than exploited immediately’. He argued conservation was only possible in a free market and a futures market for resources would allow for the anticipation of scarcity. He berated those who believed in ‘limits to growth’ for having not appreciated that the ‘factual information’ upon which they based their forecasts was ‘itself generated by the economic processes of competition and growth and hence represents no inevitability in the relationship between man and his environment’.Footnote ¹⁷⁸

The consideration given to Johnson's work, six years before Thatcher came to power, indicates that such ideas had attained footholds in the machinery of government long before 1979. Though ‘proto’, this belief in an indeterminant price-determined relationship between the economy and the environment would come to be seen as characteristically neoliberal.Footnote ¹⁷⁹ Braben and colleagues had, in their words, proposed ‘an exposition of the economy theory of optimal resource allocation in a competitive economy’.Footnote ¹⁸⁰ This claim was a central tenet of neoliberal economics.Footnote ¹⁸¹ By contrast, Braben's group argued that government-led attempts to efficiently allocate energy and resources in space and time would face ‘intractable problems of quantitative estimation’.Footnote ¹⁸² The state would always underperform compared to the market. Only competitive markets, neoliberals argued, could calculate a resource's true value, and only unimpeded consumers could assure optimal resource allocation on this basis.Footnote ¹⁸³

Braben's group affirmed that they did not advocate ‘complete laissez-faire’, and that government should be a ‘watchdog’ guarding against ‘market failure’. An example of such a failure was the ‘restraints on price competition imposed by government wage and price controls’ of the kind impeding Heath's moves toward privatisation.Footnote ¹⁸⁴ For such proto-neoliberals, Braben's proposal also came at a bad time. The Working Group published its recommendations in December 1973, a month before ‘Stage 3’ of Heath's emergency price freezes, a distinctly interventionist attempt to counter inflation.Footnote ¹⁸⁵

Epilogue

In January 1974 a three-day week was instated to ensure essential services could operate throughout winter in the face of energy shortages.Footnote ¹⁸⁶ Negotiations with the NUM failed and Heath was forced to call an election in February, which he lost.Footnote ¹⁸⁷ The Conservatives’ hope of unleashing the disciplining forces of the market had failed. The CPRS, however, remained part of Harold Wilson's incoming Labour government.Footnote ¹⁸⁸ In April, the NUM-supporting Labour MP Eric Varley revealed insights from the CPRS's long-awaited energy conservation report at the launch of the government's new ‘Department of Energy’.Footnote ¹⁸⁹ The intra-government think-tank had forecast that a 10 per cent reduction in fuel-use could save Britain £600 million a year, without lowering living standards. On this basis, Varley announced his intention to move toward ‘realistic energy pricing’, which would mean households would undergo a 15 per cent rise in electricity prices and industry a rise of 5 per cent. The government would save £200 million in subsidies previously paid to the CEGB and others annually to ensure electricity was sold below market prices, a sum that would have been footed by the taxpayer.Footnote ¹⁹⁰ However, as it was, Wilson's government retained price controls on energy out of fear of inflation, and even considered controlling the price of North Sea oil.Footnote ¹⁹¹ The long-term liberalisation of energy which Shell, members of Heath's government, and some civil servants had envisioned, was put on hold. Nonetheless, as an adjunct to carbon neoliberalism, the idea that the conservation of energy was best achieved via a freely operating price mechanism had taken root. Both sides of the political spectrum agreed that the efficient use of energy was something best achieved by the market.

The CPRS's energy conservation report seemed to have been influenced by the Market Forces Committee's proto-neoliberal arguments.Footnote ¹⁹² It opened with the statement that in ‘theory the price mechanism should provide consumers with an adequate incentive to undertake all the appropriate cost-saving conservation measures without any need for Government action’.Footnote ¹⁹³ However, the report admitted, such arrangements were not always possible, so government should introduce ‘regulation, subsidies and taxes’ to encourage conservation in situations of ‘market failure’.Footnote ¹⁹⁴ The study helped establish the notion of market failure in UK policy discourse, suggested market-led solutions, and enshrined the idea that the onus to conserve should fall on consumers.Footnote ¹⁹⁵ The government would be a ‘watchdog’, guarding against market failures and encouraging ‘information flow’ in domestic and industrial sectors to ensure the market ‘price[d] energy at true cost’ (Figure 4).Footnote ¹⁹⁶

Figure 4. Insert from Energy Conservation: A Study by the Central Policy Review Staff.

Elsewhere in the report there were concessions to old-style interventionism. Varley announced a programme of state-funded research on fuel efficiency, electric vehicles, and wave power, which would be carried out by an Energy Technology Support Unit (ETSU).Footnote ¹⁹⁷ A state-funded publicity campaign with testimonies from television chef Delia Smith and rally driver Paddy Hopkirk, called ‘Save it!’, encouraged consumers to ‘help themselves and the nation by using energy more carefully and efficiently’.Footnote ¹⁹⁸ ETSU also developed a number of energy-saving ‘public-private’ district heating initiatives, though the incoming Thatcher government abolished most of these schemes, led by her energy minister none other than reprivatisation-guru David Howell.Footnote ¹⁹⁹ Thatcher advocated energy conservation, so long as it was undertaken by private industry.Footnote ²⁰⁰ In 1981, her second energy minister, the aforementioned Nigel Lawson, announced his intention to privatise energy. In doing so, as Dieter Helm has shown, he lent on Birmingham University economist Stephen Littlechild, who promoted the ‘denationalisation’ of public utilities at the time via the IEA.Footnote ²⁰¹

However, by looking at a Lawson speech from this time, we can see how central energy conservation was to his call for reprivatisation. In 1982 he told an audience of economists that the G7's Venice Declaration two years prior had committed the UK to breaking the link between economic growth and oil consumption.Footnote ²⁰² The best way to do this, he asserted, was unleashing of the ‘demand side of the equation . . . decisions by millions of individuals and corporate users’, rather than ‘central planning’.Footnote ²⁰³ Where free markets were not possible, policies should ensure ‘opportunities for competition’ are ‘not precluded by artificial restrictions’.Footnote ²⁰⁴ Recycling the CPRS conservation study, Lawson declared government would no longer provide energy so much as enforce ‘a framework which will ensure the market operates with a minimum of distortion and energy is produced and consumed efficiently’.Footnote ²⁰⁵

The shift from the term conservation to efficiency was telling. If the state-centred nationalisation of energy infrastructure had once been considered a more efficient form of organisation than wasteful competition, a crisis-driven enthusiasm for denationalisation had led some to consider consumers and their information-relaying electrical appliances the new paragons of energy efficiency.Footnote ²⁰⁶ Peter Walker, Heath's former Secretary of State for Energy, who had been reinstated in 1983, headed a rebranded ‘Energy Efficiency Office’ which, one civil servant noticed, dropped the perceived puritanism of the title ‘Energy Conservation Division’ in favour of a name that, as that same author put it, ‘was so beautifully aligned with prevailing discourses of managerial and business efficiency’.Footnote ²⁰⁷ In a situation in which North Sea oil provided abundant energy, and before climate change became a widespread object of concern, the goal of reducing energy consumption now found little support.Footnote ²⁰⁸ By contrast, the term energy efficiency did not preclude growth in energy consumption.Footnote ²⁰⁹ Thus ended the mid-century consensus on the benefits of nationalised energy infrastructure, centrally-planned efficiency and welfare maximisation, in favour of the idea that market-disciplined consumers most efficiently used energy.Footnote ²¹⁰ In 1988, these principles informed a White Paper outlining the benefits of privatising Britain's electrical infrastructure in the belief that competition would deliver promised efficiencies, though they are still not apparent today.Footnote ²¹¹

What of Shell? Group Planning had originally conceived of conserved energy as a resource which could be realised in the long-term by allowing consumers to respond to price signals in the present.Footnote ²¹² As the energy crisis waned, they became less enthusiastic about short-term interventionist conservation, noting that ‘government campaigns and even restrictions in the cause of savings seem to have achieved very little in the three years since the energy price discontinuity’.Footnote ²¹³ A decade later, as ‘sustainability’ became the new mantra, the company instead advocated market-driven increases in energy efficiency, as they had first done in the 1970s. Efficiency increases would not only ‘contain CO₂ emissions’, they could also assure a ‘large amount of energy could be saved’.Footnote ²¹⁴ The Intergovernmental Panel on Climate Change (IPCC) has helped affirm that price-driven efficiencies and freely operating markets were the best means to conserve energy.Footnote ²¹⁵ Such optimism was unsurprising, since the futures the IPCC promoted were directly informed by Shell's scenario method.Footnote ²¹⁶ Two IPCC authors even worked at Group Planning.Footnote ²¹⁷ Shell now proselytised TINA, the idea that ‘there is no alternative’ to ‘globalisation, liberalisation, and technology’, and conservation was replaced by a belief in the ‘revolutionary force’ of efficiency.Footnote ²¹⁸ What does the presence of such ideas at the heart of climate change policy indicate? Scenarios were forged amid an earlier crisis, to grant Shell safe passage between the Scylla of dirigiste state interference and the Charybdis of indifferent laissez-faire. In an age of climate change, then, the aim remains business as usual.