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... David Wessel this is the big interview I'm joined today by Jin your again he's chairman of ITG s Cambridge Energy Research Associates ... and the author of the prize the Pulitzer Prize winning book on the energy industry ... that has come out with a new edition ... thanks for being with us to ... re start by asking you about ... where we are today is ... what's going on in the Middle East and the price of oil ... one of those fleeting moments that the couple weeks will pass Resists one of the seachange moments of all sort of change the way we think about this I think it is a sea change from moment because it certainly the geostrategic balancer structure in the Middle East has been ... significantly changed by what I started folding in January ... and discontinued ... in terms of Libya's impact on the oil market ... I it's clearly respect and price but the prices reflect more the loopy it reflected the question of what happens next ... so he's a hundred dollars a barrel sort of ... the new normal is just the beginning is the risk on the upside ... if you go back to ... two thousand and three we start with one disruption in Venezuela and it ... went up and up and up ... and when we started was very twenty dollars a barrel and a one hundred and forty seven ... and twenty seven ... op but I think it will be determined that really will be Chairman by events ... and of course before ... before this all happened ... we were starting to see strong oil prices but it was not connected to fuel the turmoil ... is connected to good news the global economy was recovering ... and you saw something that would've been unimaginable a decade ago ... that every statistic out of China about nine a factory nor if ... interest rates with respect to the oil price ... that was switched over and it's about geopolitics and what happens in at least it isn't because the supply has been constrained or is it because there's ... no anxiety about the ... the thing that we can count on the severe supply hasn't been constrained we have spare capacity ... we have machinery that the new place to deal with disruptions it goes back really the nineteen seventies created and ... we have the oil producers analysts say will put the supply out there ... but it's a question of this ... new world in which to of the communications technology and social networking ... of brings little change to what was ... when you look at it a very awesome by ... political system where people been in power for thirty years or thirty two years while forty two years ... some point it comes to an end has come to an end and is there any reason to believe it ... won't spread from where it is now ... I think that's what events will determine it depends how other governments react ... but you can safely be sure that every single government in the region and many other governments ... are looking at it in trying to ... catch up and understand ... how these communications technologies these networks that they have real interest for the ... iPad and mobilize people to the degree they have soared to new kind of politics right and so ... a lot of the countries that produce oil seem to be ... autocratic countries that have managed to bite off to lease a substantial fraction of their people ... so we have an assured source of supply and they have relatively ... rigid governments was is that ... chapter endings you think is is ... is that what's going on and I think this is you know it's I think it's still a ... work in progress in terms of what happened obviously that focuses on ... the Gulf ... Iran there was a Green Revolution two years ago it looked like a was that the capacity to ... spring some changes very brutally put down ... you can be sure that the Iranian authorities are trying to understand ... what mobilisation can happen again in August the Iran as the country ... we've already seen that in ... such deep divisions ... OK so it was under now in his address that goes higher course it depends which oilier talk about Bradley of the spread between ... our old familiar our old friend the United States the VTI and Brent ... and it's it's a ... large gap between the two brands is a good deal higher right but we can use a hundred dollars as the OK but the market Square where one to go so ... that suggests that Europe might will be more vulnerable to this particular episode of turmoil ... in the oil markets and in the US is that right ... because the prices higher WellCare ... there is a difference because increasing Europeans also spend ... a lot more money on tax ... so that when the oil price goes up they don't see the same movement at the pump ... that we do we actually ... are consumers United States are motorists feel it more directly ... also to price in the US ... the DTI is the benchmark cotton prices are now being more set by ... Brent because ... the BTI is a relatively on ... small benchmark ... I has there probably should have to do with in Cushing Oklahoma ... where it's it's priced ... in so we're seeing the impact of Brenton and our price and will see the Castelein to so we can think of it is a world markets the world is still ... having their teeth ... variations that basically it's one that tough ... so who's most vulnerable which economies are most vulnerable to rising know that I would say um ... you know ... we can feel it in terms because our motorists ... because we are very dependent upon gasoline ... and a lot of people have vehicles that are to use a lot of guessing when they drive a lot of miles and so ... you wonder things I think this not ... so well recognised back in which you have written so eloquently about about the financial crisis ... then of course before the fire is the financial crisis unfolding while prices are going up to and that affected ... Lord can people be affected people who educate mortgages subprime mortgages ... in fact a lot of businesses ... and so too must before Lehman Brothers went down oil hundred and forty seven twenty seven ... so I say our economy ... I think emerging markets ... and was also out there not so much attention that states is what's happening to ... prices commodity prices ... and ... and so there's been this kind of commodity inflation that's going on this adds to it does put pressure ... on developing countries ... and are ... in the search bar subject ... but ... the local consequences of volatility in food prices ... is part of what's the drama that were seen in the least now write because the people they're paying more for forty hours at the very real incomes are going up food prices are going up ... is just not the least you ... were in India's it's ... in many parts the world and so that's the kind of ... under current law ... but ... I would just tell you that um ... I was talking about ... when I was over at the World Economic Forum to ... it's official of one of the countries that came out of the former Soviet Union Prime Minister ... and he's in a legislative remember that the ... the Bolshevik revolution started over bread ... so bite ... so rising oil prices are obviously good if you're selling will own and not so good if you're buying ... but only as good if you're selling oil up to a point because you also many these countries now have deep stakes in the global economy right so price goes up their incomes go up ... but then they see other pop world economy but what parts of the world economy are most vulnerable to oil going to a hundred twenty thousand dollars in shares ... think I think it's this is the system and it is this a ... day the Europeans are more insulated because so much of their prices already ... it is is tax though they seem more they have other problems called ... chopper debt ... they have to worry about ... I think you have to worry about what it does to the U S ... recovery ... I think China a show all these ... Everbody who's a ... senior oil demand ... going up ... is ... very worried about ... so do think it most one sided currencies against another or is it sort of a neutral factor in what is it benefits ... currencies exporting countries the ruble for instance this is quite strong now because of that ... the dollar um ... you know we see this kind of strange dance that goes on between ... the weakening dollar strength in oil prices ... and vice versa ... the word different kind of situation now when you add to political risk ... people like hoping the dollar credit so to make the dollar stronger relative the USO's on oil prices that would do it ... it's nervousness about the world ... so um what's the ... what are the scenarios here in the Middle East if you know ... it's it's very hard to know what's gonna happen tomorrow alone two weeks of but if you just look at their ... what's that one of these ... one of the most likely scenario see things unfold ... I think you have to start with you know what it would suit ... the big issues ... and the big issues are really two one is this enormous growth in ... young populations ... you you have ... big families to have ... more income in these countries ... and you also didn't have too much better health law for life ... but as you have ... much bigger hammer so ... that is incredible youth bulge ... and this failure ... his failure to create employment ... it's hard to challenge if your eight oil exporting country ... in oil producing country that's a capital intensive business ... he creates a very good job that doesn't create a lot of shops ... and of course it also can squeeze out ... the rest the economy ... so I think all of these countries now are going to be really preoccupied and they are preoccupied ... about employment ... but it's hard ... to know ... Egypt Taiwan and Korea were all about the same place around nineteen sixty ... so ... Taiwan Korea ... became these great East Asian before they were bricks before you had breakfast with this kind of fast growth ... today ... Taiwan and Korea ... peak sport more manufacturers' in two days in Egypt as a new year ... so part of the problem about reaching whizzes difficulty in terms of becoming part of the global economy ... and as it did of course you've got this incredible called trove the beaches ... backlash ... against ... the values of globalization ... but ... the lederhosen running these countries whether they're run by a lot of credits for their democratic ... don't they have an interest in getting oil out so they can feel their country I think so that notion that somehow they're going to ... sit on it ... and you save it for their great grandchildren ... tends ... not to work that way ... when prices are very high ... desert of more relaxed ... notion about capital prices come down to get very interested ... because it the ended today ... for those countries' oil price of oil to all of our revenues ... so that the supply of oil depends more on their capacity ... you know keep the ... right to peace in ... what I said yes this into context it's ... a three country capacity what is it best to keep the peace ... said Phillies the capacity ... of good governance were not the government to run a society ... and the third is they also have to keep up the capacity to produce oil sands ... generates ... for wealth ... and ... daddy she then gets into the investment questions and that I mean investment and to ... and um ... you know technology and ... skills of your workforce all those questions ... how are we less vulnerable to an oil price ... I'll supply shock now because of what's happened in the natural gas industry you've read about how the spin this technological breakthrough we know much more that could act or think as time goes on to it that we ... read like every ... month ... we find that it's ... kind of more for breakthrough ... you know we're just getting ready for Sherr week conference in Houston ... as ... talking with the CEO of a large utilities speaking there ... and ... you can see this is the utility that ... you know because the experience that people out of gas be in short supply abundant supply prices up and down ... it opened the new vehicle industry compared to this company now says ... you know this is just a game changer changes the economics of all ... our business ... and I'd and so ... suddenly were looking at and we just did our numbers in ... the United States North America has over a hundred years of ... natural gas supply at ... current consumption levels ... as kid into fuel ... can ... of course to people governmental gas vehicles the other thing is gets and you know we'd ... end up having electric cars ... I remember it gets into fueled by helping to generate interesting ... that the other thing that striking ... you know you hear these numbers tell us imports seventy percent oil ... actually lately we've been ported the fifty percent or oil partly demand is down ... we think that the United States has really reached peak demand ... do you know we have more efficient cars biofuels will have high prints ... our population and demographic change people tried last ... Potter and the fit ... and also production has been going up ... as wonder ... you know the big things and this goes kind of actor question ... get the shale gas revolution ... when things that were very focused on his hat what impact does this happen but oil ... in your starting seen ... the adaptation of that to ... oil production ... were seen some numbers and some part of the country ... the people of given up on life ... the Faucon formation North Dakota ... it's now you know when the hottest areas in the Senate producing ten thousand barrels a day producing four becoming the ... technology it allowed us to get more gas to the ground as the applicability Oil's II and it started the no three for five years ago ... so it's ... a big story you mention the auto industry so you think the American auto industry is ... and where is now can handle a hundred dollar ... a barrel oil Fortaleza will again it's a ... question not to reveal industry it's a question about um ... the airline industry which is of course and ... the VI gets hit ... no airlines ... their oil fuel costs or twice the biggest ... expense by SAP play for ... um I think the auto dealer chain is starting to recover things looking good but if you have people stop going into the showrooms getting nervous again ... if we get a double dip ... no that's big setback ... when it ... now seems up ... on the road to recovery it was a boy about the price of gasoline itself does he I think the price of gasoline ... there's some point in there and it always argued you know it is not exactly a tipping point ... but ... you know these experience of stapler and castings closer to four dollars gallon ... that has a much ... bigger impact on psychology and counseling and three dollars and seventeen cents ... all this raises some policies has I think in the United States one of them seems to come up every time oil prices go up it ... is is the moment whether the mission turns ticket on the Strategic Petroleum Reserve unlike some of that oil into the market ... it's ... just been ... kind of ... read about my new book and I think the lesson of history is no ... no ... and no I mean God is there ... to deal with the disruption ... it basically I think it's unwise to U S government to give new business of price controls what it is ... and secondly you use it ... you know what happens if you needed ... down the road ... and I think ... you know it's painful but ... what we saw that we had a laboratory with hurricanes Katrina and Rita ... people foreigner shortages Gas Find GRV was gearing up getting out the old film footage from nineteen seventy three to nine ... didn't happen ... because we let the market adjusts quickly ... and so when two of ... you know you need to do that if it and ... send a message ... that will hear people say it ... has to do think they'll take your advice or not ... I ... if they pay attention to history MarketSite into ... I think it depends ... how high the price goes ... the president has been pretty ambitious ... he says that he wants us to deride eighty percent of our energy from clean sources ... bike twenty thirty five ... they're they're washing for twenty five years in every president always seems to want to have ... clean energy and energy independence ... is this cool any more realistic or likely to be realised in any other of the slow I think what we are keen and ... it will depend upon you know there's a ... will battle through nine Capitol Hill about the federal budget ... that if we maintain our commitment to energy research development and is up and down up and down that we ... constantly had ... and ... you know people ... engineers and scientists can make careers in this ... will see surprises to build the things that the change ... at the time frame ... I think is always a challenge because you people decided to scale up beat the energy business is ... clear to fourteen trillion dollar economy with the league Energy Foundation ... that doesn't ... change ... doesn't change overnight ... and Ideeli these technology still show that their competitive ... marketplace ... the worst in others more effort going ... at of ... innovation and ... didn't ... really we've ever seen before ... drinking ... price of part of the present proposal is to spend money on that energy innovation ... but to curtail some of this tax subsidies the subsidies to the oil and gas ... production industry here is that it was well I think no because then you know we've actuaries that are important down is because production is on ... and you know what is ... this ... you know I'm not sure that overall the subsidies ... what they're ... talking about are going to get into the ... to the complex ease the tax code ... but a notice of ... this report came out of the subsidies revealing gas industry ... and the largest one was cited ... I had to do with the tax credit ... and then use my book is the source the prize ... and b I just went back and checked in to ... discover that they change mean I about a hundred eighty degrees ... from what I actually I'm dead ... so you know you can call waiting a subsidy if you want ... but I think that you know a healthy oil and gas industry ... is ... you know is in fact some investors' interest ... in the American people ... and you know it's better that were importing fifty to seventy percent of our oil and ... Dutra set by demanding more efficient which is a lot of ... really deserves ... concentration ... but also the same time with the ... queue maintaining a reasonable production ... industry we would have had ... Shell gas revolution without I'm ... you know ... the intent of the tax code ... and Africa going for twenty years ... though one of the developments over the last couple of years has been the moratorium on deepwater drilling ... if ... either because of this or in spite of this development oil market that ... Port Royal was lifted into was more deepwater drilling ... would that change the dynamics of oil market today or is that ... no reason it takes time notice to prepare ... it's ... you know from when you start preparing to drill ... it's an eighteen month two-year process and now we don't know how long it will be ... but we're seeing the impact ... we can ... do ... the increase in production coming out of it ... the Gulfo is a result of ... several years of effort so it is the time and ... you know if it doesn't ... you know today is for not been opened up there when you see the capacity to climb in the United States it will migrate areas ... which are really focused on gross like Brazil which is of course ... one of the creaking from two years ... so go up to you would we be doing more that people are going on we you know in that ... it would clarify the read that the regulatory framework and clearly you know the system a stock and beat the system that was there before ... but then you know reasonable time to make decisions and ... not have that ... kind of in kind or another world ... so we're still in the kind of Aftershock period of ... soul is one final question what we'll be watching in the next couple of weeks to determine whether ... we're going more towards a hundred fifty dollars a barrel were going back to something more ... culpable like that but I think the most important thing is what happens elsewhere in the Middle East ... or what other events ... calm that comes from left field and ... a surprise ... because that's the question is otherwise ... we will see supply come back and market ... and when that happens and people are not to be one downside to the price curve ... so I guess it's that much into politics ... and I've interviewed geopolitics don't change the challenge to the Middle East is still the same ... and of course the other thing ... is ... is the pace of economic recovery because that's before this happened ... that was what was really the of ... the dominant factor ... in the oil market ... but um ... I think what began in ... Tunisia ... and Egypt announced bread ... is it is we are watching history