Yergin: about 84MBD of oil already being produced, Saudis will not produce 20MBD additional but will produce 14MBD; tech will save us; we will continue going deep offshore; the digital revolution, what is "oil"? oil sands will be made affordable due to new tech on oil/tar sands; we have 5 geologists working in our CERA group to make our predictions, they are not merely "economists"; technology came through in computers, look at cost of laptop, tech did not freeze in oil either --Libya will come through

Tom Asbrook:break #1

Yergin: [Have we peaked out?] Time frame to peak about next 2.5 decades, where the "undulating plateau" will come rather than sharp peak and then new tech will come through, roughly 2030 it's hazy, ...
TA: this is huge "bet" if you turn out to be wrong
Yergin: the prize is a place in history, being right about when PO hits, conservation and efficiency are part of the mix, America discovers the hybrid, look at big picture, same chicken little in the 1970's ...

TA: how are oil companies correctly playing the game straight up?

Yergin: yes. oil co.'s are being heavily watched. we have a "demand shock" because world economy (china) has grown so much, 7% rather than 3% per year ...

TA: after $10/bbl oil prices are crawling up, don't the oil companies stand to gain a "profit" by letting prices drift up?

Yergin: No. Oil companies are judged by pension plans to do a good job ... after downsizing we have a shortage of rig people ... there has been a historical pattern, after caution, people will go out and explore again and find again, it's the investing community who is at fault because they are skittish about investing based on forecast of $100/bbl and then it doesn't make it

Jamie Court: Consumer watch dog group thinks oil price is a "myth" . Number of refineries in USA is the problem ... Mobil & Chevron manipulated the refinery market by keeping small players out

TA: do you agree, Yergin?

Yergin: No it was the government. We have refinery creep. USA imports gasoline from Europe because they use diesel. New US regulatory policies are at fault ... USA is not an island onto itself
Court: It is clear oil companies knew they could hike prices by limiting number of refineries. ... we need environmentally standard gasoline to get around balkanized US system ... 10% drop since 1981 in refinery capacity ... oil companies are not stupid ... they do it on purpose ... oil co.s refuse to sell their refineries and are shutting them down instead ...

Break
TA: turning to calls from listeners

Alex: media buys into resource depletion theory ... it's bull ... to be "rational" we need numbers in gigatons ... price of commodity ... the market will take care of it...

Yergin: definition of proven reserves keeps getting expanded by technology ... the markets are sending signals ... new interest in renewables ... we need distributed energy sources ... market is sending signals to scientists , universities to come up with new alternatives ... we deal with "unknowables"

Harry: this is 30th focus on macro-economy, why not focus on poor people?

Yergin: I am concerned about this winter 2005-2006 due to disruption of natural gas supplies ... everyone should lower their thermostats by 2-3 degrees .(If everyone lowered this much we would save more natural gas than was lost from Katrina).. this winter will cause problems

TA: what about possibility of $100 oil?

Yergin: any shock can cause prices to go up substantially ... would be a shock to the economy ... we need to reduce demand pressure ... academic studies show we can be 30% more efficient

George: our boys dying in Iraq, is it about oil?

DY: it's an integrated crisis around "energy" --geopolitical, weather, look at Prius gains, there is tech potential out there; it's not just gas, you need electricity to pump the gas, the WW II model of gas security (in book The Prize) it's the supply chain infrastructure that is not secure against disaster

TA: do your numbers depend on Iraq?

DY: [evades question] take North Africa, Middle East is less than 10%

Mel Lin: what about ethanol

DY: new energy bill subsidizes ethanol, big debate on how much farm land ... scientists are looking at new biotech production of alternate fuels ... there are big surprises coming 5 years down the road ... our oil price predictions depend on American drivers switching to hybrids, it's part of our prediction mix ... geopolitics will be more important than geology ... above ground looming crises ... Iraq will be a crisis ... a new set of realities ...

end