Gulf Oil Discovery Could Have Far-Reaching Effect

Host Noah Adams speaks with Paul Roberts about the political and environmental implications of the recent oil discovery in the Gulf of Mexico. Mr. Roberts is the author of the book The End of Oil. He speaks to us from his home in Wenatchee, Wash.

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NOAH ADAMS, host:

Last week, three big oil companies, including Chevron, said it could be practical to develop a massive oil field that is way deep below the waters the Gulf of Mexico. The company said it could prove to yield more oil than Alaska's Prudhoe Bay. The reserve holds between three and 15 billion barrels of oil, possibly increasing current U.S. reserves by 50 percent.

But the oil is unlikely to reach the consumer market any time soon. Joining us from his home in Wenatchee, Washington is Paul Roberts, author of the book The End of Oil. Welcome to the program, Mr. Roberts.

Mr. PAUL ROBERTS (Author, The End of Oil): Good to be here.

ADAMS: When you heard this story this past week, it was often put this way. Big oil discovery in the Gulf, what does it mean for prices at the pump. Are we really that greedy when we jump right to the end game here for us?

Mr. ROBERTS: Well, it's certainly what people think about. I mean, they hear about oil and they want to know how does it affect the wallet or the pocketbook when they go and fill up. And it's not going to really have any effect. It takes years to get oil from an oil field like this, you know, out of wells, into pipelines, into refineries and into your tank.

It's the same problem that we face when we talk about Anwar, the oil that's up in Alaska. Even if we did move into the Artic National Wildlife Refuge, you know, we're still looking at five to 10 years before we get usable volumes of oil.

ADAMS: And you make an argument in your book that the supply of oil does not really have that much effect on the price of oil.

Mr. ROBERTS: Well, that's right. You've got a great many other factors that come into play. And I think, again, what people really need to keep in mind is, you know, when you hear something like - well, this raises the U.S. reserve by nearly half - that's actually rather pathetic. I mean, it just means that U.S. reserves were very small to being with.

Really, we've added to our reserves but we haven't really changed the equation. We still are going to have to import a growing volume of our oil from overseas. And I think that's the reality that, you know, Americans keep needing to come back to, regardless of the sensational aspect of a discovery like this.

ADAMS: Your book was 2004, The End of Oil, and you write then, Gasoline is two dollars, a barrel of oil is 40, the Middle East is volatile. That situation is going straight up, right now.

Mr. ROBERTS: Right. Well, at the time, you know, I had been talking with intelligence people who that that if oil hit $50 a barrel, that was going to be enough to do two things. It would be enough to tip the economy into recession, well, the global economy, and it my also be enough to really force the big importing nations to get much more aggressive in being involved in the affairs of these oil producers in the Middle East. And I think we've learned a couple lessons. The first is that, you know, our economy can handle higher prices, and the other thing we've learned is that, you know, as prices go up and as our focus on oil intensifies, so does our interest in these oil producing countries.

And I think that it's a recipe for disaster because you can't continue to control supply. If, for example, we were able to take care of the political chaos in Iraq and begin producing the kinds of oil that we always thought we could, that's great, but almost as sure as rain, instability is going to crop up somewhere else.

Essentially, a supply-focused oil strategy is like a game of Whac-A-Mole. You know, you smash down, you knock down the instability in one region, it's going to pop up somewhere else, and you will always face that threat. You will always face that risk as long as your energy strategy has as its focus supply. Really the only thing America could do and really needs to do is focus on the area of the equation that it can control, and that is demand. And that's an area that we have really been sadly slow to attack as aggressively as we should have.

ADAMS: And to that end you would argue, I would guess, that high prices kind of support that ethic.

Mr. ROBERTS: Well, they should. I mean, again, you know, the classic economic model says that as price goes up, demand goes down and people begin to look for alternatives. They either become more efficient in how they're using oil or at the same time they begin looking for alternatives. And we're seeing, we're beginning to see some of that. We're seeing businesses beginning to make a shift to much more energy-efficient equipment. And we're seeing a lot of investment in alternative fuels, investment that's been spurred in large part by government promises of tax breaks and the like, you know, subsidies.

So we're seeing - at some level we're seeing high prices having their effect. But at the consumer level it's as if people are still waiting and seeing. They know, I think, that in the past price spikes have always been followed by gluts. High prices tend to encourage oil companies to go out and look for more oil, invest more heavily in exploration technologies, and those usually bear fruit in the form of massive volumes of new oil, which depresses the price. And I think a lot of American consumers are waiting for that dynamic to take - to kick in. And so they're not really altering their behavior.

They're not buying a smaller car. They're not rethinking about where they live in relation to work so they can shorten their commuting time. And that's the really - I think that's the big factor, the unknown here, is when do American consumers begin taking energy efficiency seriously?

ADAMS: Would you argue then that the discovery of a great reserve under the Gulf of Mexico is not good news?

Mr. ROBERTS: Well, I mean, you could imagine various parties saying, hey, look, we don't need to worry. Energy security's taken care of. It's a huge amount of oil. I mean, it increases our reserves by half. So what's the worry? And I think that that is the kind of thing that among a certain demographic could be enough to make them stop worrying about efficiency. But it's just buying us a little bit of time.

But I haven't heard anyone really make the argument that we don't have worry anymore. I think that, you know, oil companies, the industry generally, I think even in this administration, which has been very oil optimistic, you know, over its history, I think even they realize that to start touting this as some sort of salvation would be, you know, the acme of foolishness.

ADAMS: Paul Roberts wrote the book called The End of Oil, and he talked with us from Wenatchee, Washington. Thank you, sir.

Mr. ROBERTS: My pleasure.

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