T. Boone Pickens On The Plummeting Price Of Oil Melissa Block talks to oilman T. Boone Pickens. He told the Wall Street Journal that energy companies are pumping too much oil and that none of them wants to be the first to stop.

T. Boone Pickens On The Plummeting Price Of Oil

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You've probably noticed a trend at the pump. Gas prices are the lowest they've been in about four years - on average hovering around $3 a gallon. Oil prices have plummeted more than 25 percent since June. To talk about the future of oil and other energy matters, I'm joined by longtime oilman, T. Boone Pickens. He founded an oil company in the 1950s, and now he's CEO of BP Capital, an energy-focused investment firm. He's big into natural gas, and in the past has been a big promoter of wind power. Mr. Pickens, welcome to the program.

T. BOONE PICKENS: Thank you, Melissa.

BLOCK: So we're seeing oil somewhere north of $80 a barrel now. What's your projection on how low oil prices will go? What do you think is the floor?

PICKENS: Well, the question is is how much are we going to drill? And the drilling that is going on that's creating the surplus of oil is in the United States, so it's up to the oil industry in the United States - do they want to continue to drill and bring the price down?

BLOCK: Can you imagine seeing $70-a-barrel oil? Is that a plausible scenario?

PICKENS: I think - I think you'd only see it briefly. If it did come down to that, I think it would touch it and it would - you'd start to see recovery, but we'll see.

BLOCK: You're telling U.S. oil companies, stop drilling so prices will go back up. Why should Americans agree with you on that? There has been some sort of stimulus effect, right, from low gas prices? They may be bad for producers but they're good for consumers.

PICKENS: Oh, it's great for consumers. No, I'm not - I'm just telling you what happened. I'm not (laughter) - I'm not telling you what I want to have happen. These producers are making money from drilling these wells. The question it comes down to, at what point do they quit drilling so many wells?

BLOCK: If U.S. oil producers were to cut back on drilling, what would the ripple effect be throughout the economy, not just in that industry but in all the industries that depend on it?

PICKENS: Well, of course, you'd put rigs down, and you have 1,900 rigs operating in the United States. You cut out jobs, and, you know, states like North Dakota, Oklahoma, Texas - right now those states are fully employed. The economy would suffer with that and you would cut down supply and the price of oil would go up and gasoline price would go up.

BLOCK: And just so I'm clear, are you saying that is an outcome that you would want to see happen or not want to see happen?

PICKENS: Well, I'm an oil producer, so, I mean, I'm not going to sit here and lie to you that if the price of oil went up, I'd like that.

BLOCK: When you look at the big picture of the global oil supply, do U.S. producers really have the power to influence price? Doesn't that power pretty much reside within OPEC?

PICKENS: Well, it's with OPEC as to how much they're going to produce. If they want the price to go up, they drop supply. And that historically - the Saudi's - you remember 10 years ago, OPEC had quotas for every country. But OPEC became the swing producer, so if they wanted the price to stay up, they produced less oil - the Saudi's did.

And if you remember back in '86 when the Reagan administration talked the Saudi's into producing more oil, bringing the price down and breaking the Russians, that's exactly what happened. They did produce more oil, and Russia had to have oil income, and the price of oil went down to about $10 a barrel. And consequently, the Russians were brought to their knees.

BLOCK: OPEC doesn't seem to be giving indications that it wants to reduce supply to push prices back up. What's your take on Saudi Arabia in particular? As you mentioned, in the past they have lowered production to bring up the price. They haven't done that this time. Why not?

PICKENS: Well, this hasn't happened for very long, so give them a chance. I mean, you don't see immediate adjustments. You see conversation and then you start to get an indication of what they want to do.

BLOCK: Mr. Pickens, I mentioned earlier that you have been in the past a big believer in wind energy. You were all over TV not long ago promoting that. You were going to build the world's largest wind farm in Texas; then you were going to move it to Minnesota. And then in the end, you sold off your investment in that.

PICKENS: Yes, I did. I lost a $150 million.

BLOCK: What do you think is the message of that loss?

PICKENS: Well, I just was too early. If you go back and look at Boone Pickens, my whole career, my direction is usually very good. My timing hasn't been so good sometimes. I was too early on wind, but wind will have its day.

BLOCK: Wind will have its day. I wonder if other investors that would look at that $150 million loss and say look, T. Boone Pickens didn't make it work, there's no way I'm going to put my money into wind.

PICKENS: I don't think that's the way other investors look at it. They look at it and say, Boone wasn't so smart. I'll be smarter and I'll pick my timing better than he did. I learned something from what saw him do, maybe. But I don't get a lot of credit for somebody watching what I do.

BLOCK: Well, Mr. Pickens, thanks for talking with us.

PICKENS: Sure, I enjoyed it very much.

BLOCK: That's T. Boone Pickens. He's the chairman of the hedge fund BP Capital.

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