History lessons Europe needs to look back in order to rescue consumers

Every energy shock has its winners and losers. Countries that export more oil and gas than they import do well while those that import more than they export suffer.

- Larry Elliott

That was the case when the price of oil surged in late 1973 and it is the case now.

Saudi Arabia is one country that benefits from rising fossil fuel prices, and Russia is another. The Kremlin's gas revenues have been two to three times greater than normal in the first half of this year, increasing the country's ability to withstand a long economic siege.

According to the consultancy Capital Economics, if gas prices stay at current levels, Vladimir Putin could keep exports to Europe at 20% of normal levels for the next two to three years, and could cut off supplies entirely for a year without adverse effects on the Russian economy. Europe, as was the case in the 1970s, is a net importer of gas and oil so it is at the sharp end of the energy crisis. Oil prices rose more than fourfold in late 1973, while gas prices have risen fifteenfold since the start of 2022. Import costs are rising much faster than the value of exports, worsening the terms of trade.

Even on the cautious assumption that gas prices will fall back, the blow to some European countries Germany and Italy among them - will be more severe than it was in either of the oil shocks of the 1970s.

Europe is in for an extremely tough winter. It is not a question of whether there will be a recession but how deep it is and how long it lasts. Britain, despite its North Sea oil and gas production and growing renewables sector, will be hit by rising global energy costs.