Why not tap more oil fields?

Scott Jagow May 23, 2008
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Why not tap more oil fields?

Scott Jagow May 23, 2008
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TEXT OF INTERVIEW

Scott Jagow: Oil is trading at $132 a barrel this morning.
Yesterday, we talked about a study of the world’s most important oil fields. It said those fields are aging and need much more investment, or the world faces a severe supply shortage. Today, we ask the question: Why aren’t those fields getting enough investment?

Joining us is Carola Hoyos, who covers the oil industry for The Financial Times. Carola, what’s your impression?

Carola Hoyos: I guess there’re two answers. One is that countries such as Venezuela are using their riches to pay for social programs and to keep the government in power. That’s also happening in Mexico, and there you’re seeing production at oil fields drop quite substantially. But there are also other reasons. Qatar, for example — which is a natural gas country, but also has oil and is a member of OPEC, as well as Saudi Arabia the biggest exporter in the world — are slowing down their investment. Both of them are saying, we’ve got enough money. You know, at $135 of oil, a country like Qatar, that really only has fewer than 500,000 true Qataris, doesn’t know what to do with its riches.

Jagow: Now where do the oil companies fit in this equation with the oil fields?

Hoyos: The international oil companies, as the price has gone up, have been more and more squeezed out of the main oil reserve regions of the world. As prices have gone up, countries have said, we want a bigger share of the profit. And you’ve seen that pretty much everywhere around the world.

Jagow: What do you make of the threat of some in Congress here to sue OPEC?

Hoyos: I hesitate to say this, but I agree with the White House on this one. Why on Earth would you want to bite the hand that feeds you? Yes, you don’t like the idea that they’re a cartel, but I mean look at the facts — they’re the ones that control the oil. And this political instability, however it is caused — whether it’s by an international war or internally — generally leads to a reduction in supplies. And the same thing works when you’re suing countries. You really have to be way more pragmatic, and I do think that this, again, is a political thing rather than a really thoughtful philosophy.

Jagow: Carola Hoyos of The Financial Times. Thanks for joining us.

Hoyos: Thanks a lot.

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