About this programme by Peter Day
It is not often that Global Business repeats itself … perhaps about once every 10 years. This is one of those occasions. Because the subject is so central to our lives
Last week's programme heard about the oil industry and supply, demand and prices in the wake of three newish factors with short medium and long-term impact on the energy market: the current upheaval in the Middle East and Africa, where so much oil comes from; the increasing demand from newly industrial nations all over the world; and the Japanese nuclear power disaster.
This week we continue the conversation with three people we did not squeeze dry in the first programme: the former Saudi oil minister Sheikh Yamani, the veteran American oil commentator and author Daniel Yergin, and Royal Dutch Shell's executive director in charge of not only oil discovery but also production … the industry calls it "upstream" activities. A huge job.
The Shell man is Malcolm Brinded. He talks vividly about the conflicting considerations he has to live with every day: the decision to first explore and then perhaps develop a new oil or gas field at a cost of billions of dollars to produce energy flows (and revenues) that may then continue for as long as 50 years.
These hugely long-term perspectives (much longer than most corporations have to deal with) have to be balanced against the day by day, minute by minute gyrations of oil prices in the world's marketplaces.
This long term view of the future is one reason why it is so interesting also to look back at the recent history of the energy industry, as the oil producers cartel OPEC flexed its muscles in the 1970s, and then saw its power diminish as other energy players have risen to prominence.
And then there is the fascinating question of whether oil discoveries have peaked … so that we are now finding new oil at a slower rate than we are consuming it. The Peak Oil argument is vigorously debated, but it may well be that in a carbon averse world, we have used up the easy energy finds and the rest are going to be much more difficult to get at.
Last week we had some fascinating insights from Tim Morgan, who is global head of research at the London brokers Tullett Prebon.
He's a fast talker and we covered a lot of ground then, so we don't return to him this week, but his thesis is ear-catching.
Tim Morgan says that energy is the only force in town, and that one ought to see the whole economy in economic terms: food, trade, and every other human activity are no more than energy use benefitting from the huge productivity impact of using oil well.
Ask a passerby to push back home a car you have fuelled with a gallon of petrol and he or she will probably charge you $7,000 to do a job that would take $3 worth of what the American call "gas". A vivid example of the impact of energy use on our lives.
And how does that effect the oil price argument? Well Tim Morgan thinks that the cheap-to-get energy has now been harvested. From now on things will get harder. Most likely, economic things, too.
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