Peak Oil on NPR's Marketplace (Transcript)

DAVID JOHNSON & T. BOONE PICKENS ON NPR'S MARKETPLACE REPORT

Announcer: Time to check the week on Wall Street, with stock broker and business analyst David Johnson, in Dallas. Hello, David.
David Johnson: Hello, Kai.
Announcer: Listen, let's talk these oil prices, for just a sec. You know, I mean, we watch that thing, sort of closely around here. You do, too. They were nudging up, kind of all week. Seems to me, nobody is really paying attention.
David Johnson: Well, not until yesterday. That's when all of a sudden, everybody started looking. I guess it's because - well, essentially it's because oil broke $60 a barrel. Oh, my gosh, you know. Anything can happen. Now, the reality is, we also see the Dow go up - it depends on how you gauge it. Let's go back a month or six weeks. And, we've been up for about five or six hundred points. We were probably ready for some profit taking too. But, now, everybody's talking oil. I went back over, and talked to the legendary oil man, T. Boone Pickens, today. Do you remember him?
Announcer: I do.
David Johnson: Well, he had told me, some time ago. He said, you're going to see $60 oil, before you see 40. I said, well, okay. Now, we've seen 60. Are we going to see 40 again? He said, you're never going to see 40 again. You will never see $40 oil again.
Announcer: That's not such a nice thing to hear, I think. We'll never see $40 a barrel again.
David Johnson: No, but, it was probably his comments on gasoline, that got my attention.
T. Boone Pickens: I think gasoline. We'll see it as high as $3, in the next year. It'll creep on up. But, on the other hand, you could find with - you could get a couple of refineries go down. And, then it will spike on you. That's what'll happen.
Announcer: Now, I have to tell you, David, I'm just getting used to paying $2.50, here. I don't know about you.
David Johnson: Yeah, and well, I haven't seen $2.50 out in Texas. So, we're more like $2 a barrel. So, he's - and actually, if you want to. For California; we can add half a buck. And, he says, you know, in certain exacerbating situations; you could see something more than that. But, I'll tell ya', maybe the most shocking thing to me, was he said; you know, this isn't it. This isn't over with. He said, you know, what you really got to look toward; is the end of the year.
T. Boone Pickens: It's gonna be a very, very interesting fourth quarter. We're going to have 84 million barrels of oil. And, we're gonna have 86 million barrels of demand. Supply before demand of 86. That's going to be hard to service. I don't know what happens, in the fourth quarter this year.
Announcer: Yeah, I do. A supply and demand is out of whack. You tell me, there.
David Johnson: Exactly. The only thing that could be our salvation is that some say, there's about fifteen bucks of speculation in oil. And, if you have happen in the oil market, what Greenspan thinks might happen in the housing market someday; that poof, fifteen bucks will disappear right away.
Announcer: Let me ask you about Mr. Greenspan and company. They meet, I guess, Tuesday or Wednesday, Thursday. Or, whatever day it is; to talk interest rates. What do you think in there?
David Johnson: Well, I mean, the assumption is they're going to raise interest rates again. It may be a quarter of a point, this time. Maybe another series of quarter point hikes, over the weeks to come. The new Texas Fed Chief, from Dallas. The Federal Reserve Chief, was quoted on television the other day, as being - some would suggest being entirely too candid in saying; they were in the eighth inning of a nine inning ballgame. When it came to raising interest rates. And, the way those guys work; just to prove him wrong, they may play extra innings, Kai.
Announcer: Well, we'll see what happens. David Johnson in Dallas, thanks a lot.

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MARK HERTSGAARD COMMENTARY ON NPR'S MARKETPLACE REPORT

Announcer: Gold, at $60 a barrel; once again today. Setting analysts a twitter. Should we blame the looming winter? Refinery backlogs, maybe? Or, oil thirsty China? Commentator Mark Hertsgaard says, the realreason is way more simple than that.

Mark Hertsgaard: It used to be, only environmentalists and conspiracy nuts, warned about the world running out of oil. Not any more. A growing number of industry insiders, now admit that the earth's oil is finite. Scarcities and sky rocketing prices are eminent. And, our governments and economies, are utterly unprepared for the chaos ahead.

The insiders include Matthew Simmons, an investment analyst; who's briefed President Bush and Exxon-Mobil. Which recently projected, without releasing any press releases; that non-OPEC production, will peak by 2010.

Peak oil is the key phrase. The earth isn't about to surrender it's last drop of oil. Rather, peak is when about half of any given amount of oil is pumped out. And, half is still remains. But, that second half, is much costlier and uncertain to obtain. With global demand, increasing every year; that means higher and higher prices. And, more frequent shortages. Think back to the oil shocks and gas lines, in the 1970's. Then, imagine those shocks continuing for decades. In this peak oil future, suburban living will be impossible. Economies could crater. And, nations would go to war. Conventional wisdom says, the magic of the market will solve the problem. Higher prices will call forth more supply. In particular, Saudi Arabia is assumed to hold inexhaustible reserves. But, Simmons, the analyst who briefed President Bush; demolishes those assumptions in his book, "Twilight in the Desert". Simmons notes, there's virtually no verifiable data, that Saudi Arabia oil is inexhaustible. Outsiders have essentially been taking the Saudi's word for it. Simmons believes, Saudi oil is at or beyond peak. And, the world is heading for a crash.

All of which, casts a harsh light on the debate in Washington; with it's posturing about ending U.S. dependency on foreign oil. If the peak oil prophets are right; $3 a gallon gas, will soon sound cheap. And, the real imperative, is to end our dependence on oil - all together.

Announcer: Mark Hertsgaard is the author of "Earth Odyssey: Around the World, In Search of Our Environmental Future". We are in search of your thoughts. Send them along. It's letters@marketplace.org.