Power Struggle

Among all the other economic changes that are taking place in Europe, one that has gone almost unnoticed outside the Continent itself is an upheaval among Europe's sources of energy. By 1970, the Common Market's need for power to fuel its growth will have almost doubled. To Europe's coal industry, long the basic power supplier of the Continent, this need should be good news--but it is not. Just as the U.S. switched in the late 1940s from dependence on coal to oil and natural gas, Europe today is undergoing a basic power change that threatens its $7 billion coal industry and creates problems for statesmen and businessmen alike.

Productivity in European coal mines has not kept pace with wages, and coal prices are high: U.S. coal, even with transportation costs tacked on, sells in Germany for $15 a ton v. $17 for local coal. In the Ruhr valley, which digs 50% of Common Market coal, 24 pits have been closed since 1958, and six more are shutting down this year; frequent processions of silent, protesting miners carrying banners attest to the human consequences. Ten years ago, the 225 million tons of coal that Britain mined each year represented 91% of all the energy it consumed; by last year output had dropped to 191 million tons, or 72% of all fuel. All over Europe, from Scandinavia to the Mediterranean, coal's share of the power market is growing smaller and smaller.

New Rivals. As in the U.S., oil and natural gas are rapidly taking over as cheaper and more convenient fuels. Most of Europe's factories, trains and homes will soon hum, run and heat on oil, and a few steel mills right in the Ruhr valley are now fired by oil. In 1960, the Common Six consumed 87 million tons of oil, or 27% of all fuel used--while coal's share dropped to 54%. By 1970, oil imports will raise the total to 48%. The discovery of natural gas in Italy's Po valley, in France's Lacq, and at a newly found field at Groningen in The Netherlands, add a new rival for coal.

Unlike the U.S. when it made its changeover from coal, Europe does not have nearly enough natural gas to supply its needs for many years to come, and has practically no oil of its own beyond minor deposits along the North Sea coast. It hopes to increase its natural gas supplies until they can supply 6% of the power market by 1970, but for oil, it must depend indefinitely on the outside. To keep their oil supply as cheap as possible, Europeans try to pit one oil-producing nation against another, and vary their sources of supply. In 1962, the Common Market area bought 92.6 million tons of oil from the Middle East, 12 million tons from the Western Hemisphere, and 6.8 million tons from the Soviet bloc.

Selective Dumping. Russia is pressing hard to make itself the main supplier of Europe's oil needs. The world's second oil producer after the U.S., it is finishing a 3,600-mile, 40-in. westward pipeline that branches into Czechoslovakia, East Germany, Poland and Hungary. Russia uses selective dumping to attract European businessmen, has sold the same oil to Italy or West Germany at $9.50 a ton that it sold to impoverished satellite Poland for $23. Italy, the third biggest oil importer in Europe, already gets 17% of its oil from Russia under a contract that saved the Italians about $20 million last year compared with Western prices.

To protect their ailing coal industry, European nations subsidize it generously. They also tax and restrict other fuels, and put limits on imported coal. But the eventual victory of oil and gas seems inevitable. The last European nation to hold out against importing Russian oil is Great Britain. Last week the British government acknowledged a Russian offer to give $56 million worth of orders to Britain's hard-pressed shipbuilding industry if Britain would buy two to three million tons of Russian oil a year. It is a measure of the way Europe's new "power struggle" is going that Britain has decided to think over the offer instead of quickly refusing, as it always has in the past.

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