TEXT OF INTERVIEW
Kai Ryssdal: If you want to talk oil, Houston, Texas, is a pretty good place to be. That’s definitely true this week. There’s a huge energy conference happening right now. More oil company CEOs and analysts than you can shake a stick at. OPEC’s got people there. It’s so high profile it’s been called the Davos of the oil industry.
Marketplace’s Steve Tong didn’t win a trip to the Swiss Alps this year, but he is on the line from Houston. Hey Scott.
Scott Tong: Hey Kai.
Ryssdal: So what’s the mood? Oil is at $105. Libya is still in trouble. How are people feeling?
Tong: I’m looking for panic, but they don’t have any over here, Kai. I spoke to a Kuwaiti oil executive who said, “You know, this is what we do every day, is we manage risk and deal with these parts of the world that are unstable, but that happens to be where the hydrocarbons often are.” So this is not anxiety, she told me, this is life. So short-term, here’s what the numbers show, that even if Libya’s production is taken off line — a million barrels per day, etc. — Saudi Arabia has plenty of spare capacity to compensate for that. They say this over and over at this conference. They also say in the Middle East, there have been a lot of wars in Algeria and in Yemen and production kept up. The head of the French oil company Total said this morning that countries should not go to their emergency stockpiles because that would be a sign of panic to the market and we don’t want to tell the world that we’re panicking because there’s no reason for it.
Ryssdal: OK, that works, it seem to me, in the short-term, Scott, but what about longer-term if this Libya thing drags on and if unrest in the Middle East stays shaky?
Tong: The longer-term picture is a totally different story. You talked about what’s happening on the oil supply side. What a lot of people talk about here is on the demand side. Going forward, if you have 7-8 percent growth in emerging markets — you have an India middle class, a China middle class, growth in Brazil, more people with cars and cell phones — supply is not going to be able to keep up with that. A few minutes ago, the head of BP said the world before long will consumer 40 percent more energy than we do today. So that’s the warning sign. And it could be, according to the CEO of Hess oil company, that we are going to have to ration oil in three or four years and we could have another price spike, which means another $140 a barrel which we had in 2008. Might not be an aberration, but a warning of a future that’s coming. Not tomorrow, but maybe four to five years.
Ryssdal: Two things happen when oil gets this high. One is that people start talking about more domestic production, drilling here, which is an entirely different conversation. But alternatives and renewables become more attractive. They become more cost-effective. Is there any talk of that among oil industry executives at this conference?
Tong: A lot of these oil companies invest in those renewables. They invest in wind, in solar, a lot of them obviously are in natural gas, which has a much smaller carbon footprint and is a domestic source of energy. What a lot of the projections say is all these things are not going to get there in time. Electric vehicles, the next-generation battery, may be 10-15 years away. Wind and solar are on a very long runway, so they’re not going to be deployed in gigantic numbers any time soon. So what we really need is more of everything. There’s a lot of talk of everything. We need more natural gas, more renewables, more efficient cars and homes. And yes, we do need more oil. Now it’s certainly very self-serving for people at a conference like this to say that, but the alternative — according to the head of the French oil company Total — is the world goes dark.
Ryssdal: Marketplace’s Scott Tong in Houston for us talking about the future, short-term and long-term, for the oil industry and us. Scott, thanks a lot.
Tong: You’re welcome.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?