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<P class=MsoNormal><SPAN style="FONT-SIZE: 12pt">This interview was carried by
Australian Broadcasting Corporation on May 13, 2008. See<?xml:namespace
prefix = o ns = "urn:schemas-microsoft-com:office:office"
/><o:p></o:p></SPAN></P>
<P class=MsoNormal><SPAN style="FONT-SIZE: 12pt"><A
href="">http://www.abc.net.au/lateline/content/2007/s2242621.htm</A>.<o:p></o:p></SPAN></P>
<H1>Nothing governments can do about rising oil prices: oil expert Richard
Heinberg<o:p></o:p></H1>
<P class=organisation>Australian Broadcasting Corporation<o:p></o:p></P>
<P class=broadcast>Broadcast: 13/05/2008<o:p></o:p></P>
<P class=author>Reporter: Tony Jones<o:p></o:p></P>
<P>Oil expert and author Richard Heinberg joins Lateline to discuss the
phenomenon of peak oil.<o:p></o:p></P>
<H2><SPAN style="FONT-SIZE: 12pt">Transcript<o:p></o:p></SPAN></H2>
<P class=MsoNormal><SPAN style="FONT-SIZE: 12pt">TONY JONES: Now to tonight's
interview with Richard Heinberg. He's one of the world's leading experts on the
phenomenon of peak oil. That's the point at which the world's oil reserves go
into decline. The idea is that having reached its peak it's all downhill from
there and there's evidence that global rates of oil discovery have been
declining since the 1960s, and that new oilfields are becoming more and more
inaccessible. <BR><BR>So as demand increases and supply decreases the price of
oil goes up and up and up, as we've painfully experienced in recent years. No
one really knows when we'll reach peak oil. It may have already happened, it may
take another three decades. Why has the price of oil gone up so fast and so high
in recent years? How much higher could it go and can anything be done to reverse
this relentless process? <BR><BR>Richard Heinberg has written a series of books
on the oil crisis including 'The Party's over', 'Power Down' and his latest 'The
Oil Depletion Protocol'. I spoke to him a short time ago in Santa Rosa,
California.<BR><BR>Richard Heinberg, thanks for joining us.<BR><BR>RICHARD
HEINBERG, oil expert and author: My pleasure.<BR><BR>TONY JONES: Now let's start
with the recent oil price predictions. Goldman Sachs is saying within two years
oil could reach US $200 a barrel. Other analysts have a different view and say
it could go down back to $40 a barrel. Where do you sit on this? What do you
think is going to happen?<BR><BR>RICHARD HEINBERG: I think the price could lose
some ground temporarily but over the long term there's nowhere for oil prices to
go but up. And we could, in fact, see prices considerably above $200 a barrel
within the next two or three years.<BR><BR>TONY JONES: What does this mean for
governments like Australia? We're just about to have our Budget released in this
country. The Federal, the new Labor Government came to power promising to try
and do something about rising food prices in supermarkets and rising oil prices.
It sounds like their hands are going to be tied for the foreseeable
future?<BR><BR>RICHARD HEINBERG: Yes, I think that's true. I don't think there's
anything that the Australian Government can do or the US Government can do about
rising oil and food prices and by the way, these two things are connected. The
rising oil prices create increased costs for farmers. Also the cost of shipping,
food and just about everything else is increasing, so these high prices are
going to have knock on effects through the economy. The airline industry is
going to be hard hit and again, there's very little that governments can do
other than to start planning for high oil prices. We should be redesigning our
economies to operate with less oil. Fundamentally that's the only sane policy
response. We can't just hope somehow for oil prices to come back down to $40 a
barrel. It's not going to happen.<BR><BR>TONY JONES: I'll come in a moment to
how governments could do that. But in the meantime, we had only last week the
Noble Prize winning economist Joe Stiglitz on this program. He actually blames
the Iraq war for the trigger that led oil prices to start spiralling. Do you
agree with him?<BR><BR>RICHARD HEINBERG: Well, I thought the US invasion of Iraq
was a terrible idea at the time and still feel that way, so if I thought that
somehow the high oil prices could be blamed on that I'd be happy to do so. I
think he may be right that there were some minor trigger effect there. But
really, the situation we're seeing now mostly has to do with the fundamentals of
supply and demand. We have more countries every year in the category of oil
importing nations and fewer countries every year that are able to export oil.
That's the nub of the issue.<BR><BR>TONY JONES: Including former oil producing
countries like Indonesia, for example?<BR><BR>RICHARD HEINBERG: And like Great
Britain and Norway. Great Britain has now become a net oil importing country
again after 30 years of being an exporter.<BR><BR>TONY JONES: Stiglitz takes
quite a conservative approach in his book on the costs of the war. But he makes
the point that before the war the futures market which usually gets these things
pretty right, had already factored in the increasing demand from the boom
economies like India and China and yet the increases that have happened are way
beyond what the futures market expected, which is why he tends to blame the war.
And he makes the further argument that the big Arab oil producing companies have
decided keeping their asset in the ground and still making record profits is the
way to go?<BR><BR>RICHARD HEINBERG: He's right on the latter point. There has
been a definite change of attitude on the part of some of the Arab oil exporting
countries, but it's entirely understandable. Look at Kuwait, for example. There
was a little kerfuffle a couple of years ago when oil intelligence Weekly
published an article suggesting that Kuwait's real oil reserves were only half
of what that country had been telling the world and the Kuwaiti Parliament then
went to the oil industry and said, "Is this really true? What are our real
reserves?" The oil minister said, "I'll get back to you" and evidently still
hasn't. The evidence is clear that Kuwait and a number of other oil exporting
countries have overstated reserves pretty substantially, and these are countries
which rely on oil exports essentially for most of their income nationally. So
what are they going to do for an encore once the oil is gone? It really makes
sense for them to slow down on production rather than pumping the oil out of the
ground as fast as they can and be left with nothing for the future.<BR><BR>TONY
JONES: Do we know the truth, though? The global oil industry has consistently
revised oil reserves upwards over a period of time. It is estimated there's more
than a trillion barrels left underground just from known reserves at the moment
which would last for a considerable amount of time obviously?<BR><BR>RICHARD
HEINBERG: Well, yes. If we could use those reserves at any arbitrary rate, the
problem is oil is getting harder and hard tore get out of the ground. We've used
the cheap, easy stuff. We've used the oil we could get from Texas and Oklahoma
and even the North Sea and now what we're finding are oilfields in ultra deep
water and places that are extremely difficult to access from a technical
standpoint. We're also starting to get more from places like the Canadian tar
sands where there's an enormous amount of resource in place, but it's not liquid
oil. It's the stuff that has to be converted into synthetic fuel using enormous
amounts of water and natural gas. Very resource intensive and environmentally
ruinous process. So the easy glory days of the oil industry are over and just
about everybody in the industry would agree with that statement.<BR><BR>TONY
JONES: So you don't believe we may be facing a sort of oil embargo as we faced
in 1973, but this time by stealth?<BR><BR>RICHARD HEINBERG: No. In 1973 what we
saw was political and it was short term. What we're seeing now is long term. I
don't think this is ever going to turn around. Most of the, even the Arab oil
producers are producing flat out. They're producing as much oil bringing it to
market as fast as they can. The only possible exception is Saudi Arabia and the
Saudis may have as much as two million barrels a day in spare production
capacity. We don't know for sure because there's no way for a third party agency
to audit the Saudi reserves or even their production data. But evidence would
suggest that they probably have some production capacity in reserve. That's
about the only country that can say that.<BR><BR>TONY JONES: I suppose that is
the key question. If they were hiding behind the notion of peak oil that notion
is terribly unclear, because we may have already passed the peak oil point or,
in fact, we may not pass it I think you acknowledge yourself for another three
decades which puts a completely different time scale on the whole
event?<BR><BR>RICHARD HEINBERG: There are a few holdout analysts who are saying
we may not see global oil production peak for two or three decades, but they're
substantially in the minority these days and becoming ever more so. I think that
the evidence is lining up very strongly in favour of a notion of a near term
global oil production peak. For the last two years oil declines have led oil
advances, I think a pretty good argument can be made that we're there right
now.<BR><BR>TONY JONES: So in the meantime, how much pressure is there going to
be to open up brand new areas for exploration, parts of the Arctic which haven't
been drilled and even the Antarctic which currently where oil drilling and
exploration are forbidden because it's considered to be a world park at the
moment?<BR><BR>RICHARD HEINBERG: There is tremendous competition to gain access
to these areas. Russia, Canada and some other nations are laying claim to areas
of the Arctic to be able to drill there in the future. This is not very
prospective area. In other words, from a geological standpoint it's very
unlikely we'll find substantial amounts of recoverable oil in the Arctic, and I
think it's a sign of the desperation of the industry that there's so much
excitement about going into a place that will have unprecedented challenges from
a technical standpoint just in operating there. We don't have the equipment that
can operate in the Arctic. It's going to be decades before oil can be
commercially produced there and yet, we see this enormous competition for access
to the place. I think it's, as I said, a sign of desperation.<BR><BR>TONY JONES:
At what point in the price cycle does it become economic to convert coal into
synthetic fuel, gas into liquids, for example?<BR><BR>RICHARD HEINBERG: Well,
the technology for turning either coal or natural gas into liquid fuels is
already in place. South Africa has been turning coal into liquid fuel for many
years. A company called Sassal operates in South Africa and produces 150,000
barrels a day. That's only a small part of South Africa's oil consumption. They
use about 450,000 barrels a day. Even in the one country using this technology
they're not getting even a majority of their oil from it. So it's going to take
an enormous amount of investment to build coal to liquids plants. These are very
expensive facilities to build. We're taking a low grade hydro carbon, namely
coal, we're putting it through an intensive process that costs about 40 per cent
of the energy in the coal to produce a expensive synthetic fuel. Again, it can
be done. I think probably the US Department of Defence is going to go in the
direction of coal to liquids but frankly I think it's unlikely we'll see a very
large scale implementation of this technology, just because it is so expensive
and it's so inefficient from an energy standpoint.<BR><BR>TONY JONES: Then you
have the incoming problems obviously of the economic viability of doing that
once you add into it the global warming costs?<BR><BR>RICHARD HEINBERG: Well, of
course, yes. We're talking about again an environmentally ruinous practice. The
Sassal plant in South Africa can be seen from space. It's the greatest single
point source of pollution on the entire African continent and that's just
150,000 barrels a day and the world is using 85 million barrels a day of liquid
fuel. If we were to try to replace any substantial portion of that with coal to
liquids we would be looking at a climate doomsday scenario.<BR><BR>TONY JONES:
You've thought about this Richard obviously in great detail over many years now
and your proposed plan for the world, in fact, is to produce a kind of global
agreement similar in a way to the Kyoto Protocol which you call the oil
depletion protocol. Can you tell us how that would work and how hard it might be
to get such an agreement between competing economies?<BR><BR>RICHARD HEINBERG: I
wouldn't pretend to suggest it won't be difficult to get that kind of agreement,
but essentially it would be a protocol to reduce oil consumption globally and
nationally and also oil production by the world depletion rate which is about
2.5 per cent per year. In other words of the oil that's left to extract out of
the ground we're using about 2.5 per cent of that every year. If we reduced our
consumption by that same amount that would stabilise prices and it would reduce
the incentive for competition and perhaps even deadly competition in the future
for access to the remaining supplies of oil in the world. I honestly see the oil
depletion protocol as the only way forward that doesn't lead to global oil wars
and to economic collapse.<BR><BR>TONY JONES: What do you think it would take for
this to become top of the agenda, for example, in a new White House in Western
governments around the world and indeed in the booming economies of China and
India, what would it take to move that idea to centre stage?<BR><BR>RICHARD
HEINBERG: Well, obviously it would take some political courage. Policy makers
would have to understand once and for all that oil prices are not going down
they're only going higher. So the only thing we can do at this point is to adapt
to this new era that we're in of rapid oil depletion. That means that if we're
going to save our economies we have to undo our vulnerability to oil scarcity
and higher prices and the only way to do that is to reduce our consumption.
Sweden has already taken this step. The Swedes have made it a target to become
oil dependent by 2020 and there are a number of cities in North America that
have made a similar kind of commitment. Portland Oregon, Oakland California, and
a number of others have established oil vulnerability task forces and are
looking at ways of reducing their city oil consumption quite dramatically over
the next few years. Now this kind of proposal has yet to make it to the halls of
Congress and the US or to Parliament in Australia, but I think it's important
that the idea be brought forward as soon as possible, because the sooner we
start reducing nationally our oil consumption the sooner we can stabilise prices
and begin to adapt to the world that we're moving into.<BR><BR>TONY JONES: You
raise this spectre of oil wars and future conflict over oil. What do you mean
exactly? Where would you see that arising?<BR><BR>RICHARD HEINBERG: Well, what
we're seeing is not just a likely decline in total oil production, but
especially a decline in available oil exports, because as I mentioned earlier
the oil exporting countries are seeing such rapidly increasing domestic demand.
So the amount available on the global export market could decline by up to half
just within the next 10 to 15 years. That's going to put enormous pressure on
major oil importing countries like the United States and China. The US is the
world's foremost oil importer, China is the world's second foremost oil
importing countries. These two countries are going to head to head for access to
supplies in central Asia, Africa, in the Middle East, and it's difficult to
envision a situation in which that competition would not become very, very
intense.<BR><BR>TONY JONES: Not so long ago, there were some senior neo
conservative thinkers in Washington who were actually advocating the United
States taking over Saudi Arabian oilfields. The implications of that are
extraordinary, of course. Could you imagine ever reaching the point where that
became seriously part of the administration's agenda?<BR><BR>RICHARD HEINBERG:
Absolutely, yes. If there were to be a revolution in Saudi Arabia and the
country were to be taken over by any political party or group that was not
friendly to America's interest, then I think it's very likely that the US would
invade. <BR><BR>TONY JOENS: Richard Heinberg, we'll have to leave you there. We
thank you very much for taking the time to talk to us tonight on
Lateline.<BR><BR>RICHARD HEINBERG: Thank you Tony, it's been a
pleasure.<o:p></o:p></SPAN></P>
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