 So good morning and welcome. I'm Frank Verasjo. I'm senior vice president at the Center for Strategic Studies more importantly for today's session I also am director of the energy and national security program And it's my real pleasure to have this opportunity to discuss what we view as kind of Technonic shifts going on in the energy marketplace and the panel that we have for you this morning I could think of three better folks to discuss this very important subject. I know some folks are still in the back picking up coffee after the first session If you want to come up and come close to the front, you're certainly welcome to do that I would ask one thing is that you turn off your cell phones at this point Just out of courtesy to both the panel and the folks around you We'll have ample time for kind of Q&A at the end I've got a short presentation just to frame and then we'll kind of move on from there The session that we were going to talk about this morning Most of the folks as I look at on this panel have been involved in energy for decades And we think that there actually are a number of shifts that are going on in the energy marketplace and a lot of the tools that we constructed in the 1970s may not be all that relevant for dealing with today's world Including as you look at the SPR when you look at refineries you look at alternative fuels and the scalability and how fast you can Bring things on so we're going to walk you through what we think are some of the changes that we're going on And then we'll turn to our panelists to talk about the implications of that and how you exactly deal with that How you address it and what do you do going forward? The folks we have with us this morning. So John Hess is the chairman and CEO of Hess Hess is involved in a number of plays around the world in the Middle East Latin America Africa Brings an exceptional both different perspective business and commercial perspective to the discussion, but also some views on Gas natural gas and all conventional fuels pricing of gasoline and whether we ought to have taxes Proactive things that you don't normally hear from folks in the energy industry Dr. Phil sharp for those of you in Washington Phil's been around for decades when I first met him in the 70s I was just a child at the time Phil was a 10 term congressman and was on the energy and commerce committee and was really responsible for putting in place a lot Of the landmark legislation. He won't take credit for that now That we're dealing with today He's now the president of resources for the future and brings a great deal of both economic and environmental perspective And we're also going to talk about politics a little bit today and then Mike from and so dr. From and I have come to learn and admire Over the last two years Mike is both the deputy national security adviser. He's the deputy economic counselor He spends time doing the meh the G20 the G8 Since he's the Sherpa for all things and he's one of the few people within the administration and has responsibility for both Domestic economic issues and then foreign policy national security issues. So it's a real pleasure to have Mike here with us again this morning Let me just take you through what we talked to as kind of framing slides Unfortunately, I I'm gonna advance this so if they're stacked and I don't get to exactly where I'm going be patient And there's one of the first. I'm just gonna stack this up to start with So in terms of the the key features of the changing landscape, this is stuff that you've heard before So basically we have a situation where demand is changing the OECD countries that traditionally were the sources of new demand It's now moved to the non OECD and it's basically Asia and the Middle East So we have a new cast of characters We have a changing resource base and the resource base is changing in a couple of ways both Concentration of conventional resources and I'll show you that in a second And then you couple that up with the cost and the technology and the difficulty Both economic and geopolitically of getting these unconventional resources, which in fact are enormous and I know John's gonna speak to a little bit of that We have the impact of price volatility And when you look at the energy industry, especially it's historically one that has leads and lags So there's investment time frames and we typically do things in the rear view mirror When we look at prices and we look at demand projections and over the last couple of years since 2004 We've really had kind of a watershed of new demand The growth in demand year-on-year from 2003 to 2005 was double what it had been the average of the previous 10 years And part of it was China, but it wasn't all of China and then we hit the volatility of 2007 2008 We saw the declines as a result of economic downturn in 2009 and 10 and now we're starting to see a resurgence coming back And this also has implications for greenhouse gas emissions because the fuel choices that countries make are extremely important We have new players emerging So it's not only the BRIC countries and it's not only China But a lot of the institutions that we dealt with that were post World War two when they were conceived a lot of the members have Changed so there's a question whether as the rules of the road change and the players change are the institutions capable of dealing with that And I hope Michael touch on a little bit of that because we've actually Tried to use the G8 and G20 in different fashions as we talk about international negotiations And then the projected impacts of climate change and we'll go through that both for producing countries As well as for consumers because even if it's not anthropogenic if you believe that there's another cause Then when you look at the mitigating factors for food agriculture Water development and water scarcity disease population mobility across countries the capability of nations to deal with that is going to be extremely important Okay, so there should be a demand slide here What this basically shows is that the non OECD production or consumption has gone up dramatically and 50% of the new growth is expected to come from China and India, and it's not just in conventional fuels There's the OECD demand, but it's in renewables as well So it's all fuel forms that we're dealing with and this is extremely important because as countries make their investment in fuel choices When you look at population in GDP GDP growth, this is where the new demand centers are Which then needs leads to this notion of new realignments and the question becomes whether China and Venezuela or China and Saudi Arabia Can partner together because of consumer producer needs and where does that lead the United States? There's been a lot of discussion recently about the MENA countries the Middle East and North Africa and Collectively they're responsible for about a third of global oil production And they also house a lot of the transit choke points that we talk about so in the case of Egypt a lot of people were concerned not because of Egyptian production because of the volumes that transited the Sumed pipeline and Suez canal and Fortunately, the military was stepped in and infrastructure was protected But even when we look at piracy and battle Mandab or we look at the Straits of Hormuz These transit issues become extremely important because of the concentration of resources So decline curves are the other thing that we talk about frequently in the oil industry And even if you believe that there's enormous potential out there and we do we think there's trillions of barrels out there Not a big believer in the hover curve in terms of global production When you look at just normal depletion rates and take between four and seven percent of depletion You have to replace the entire system by 2035 or 2040 This is an enormous task and if you add demand growth on top of that It makes that lifts a lot more difficult and when you consider the countries that we're dealing with you have Governance and access issues as well. So this is trickly important And then we have the conventional versus unconventional So your blue barrels are unconventional your red barrels are conventional what this shows you is concentration of conventional resources No surprise Middle East North Africa Russian the Caspian, right? We have a lot of unconventionals in the Western Hemisphere. This is heavy oil in Venezuela It's oil sands and candidates the shales in the United States But these are technologically difficult and economically difficult to access and they have environmental implications as well So we have to be careful about how we do this going forward, but there's an access a resource-based access issue here and Then you look at the concentration So if you take the top 20 producers and resource holders in the world, there's four that are IOC's So we're dealing mostly with ministries and national oil companies and This is a question of access Where you can get to in terms of the lowest conventional prices are logically in the Middle East on shore Some of the unconventional plays whether it's lower tertiary or shales or oil sands in the Western Hemisphere But how do you get those economically and responsible development in dealing with environmental issues? And then we have global climate change, and I'm just going to stack this real fast when you take into consideration Okay hunger coastal risks Agriculture migration patterns that could occur you overlay conflict zones, which are the little black dots You can readily see that in those conventional producing areas even though they have a lot of resources in terms of security challenges going forward This is a big lift for the United States So we don't get 50% of our imports from the Middle East It's a much lower figure than that and our largest supplier is clearly Canada But there's some decisions that we have to make going forward to make this work So now the good news so that I don't totally depress you efficiency is one of the good news stories Lots of opportunity to improve energy intensity and efficiency Some in the Middle East a lot in the former Soviet Union, but this is prices go up This should be one of the benefits that we see in terms of constraining demand Renewables is another huge story wind energy has doubled over the last couple years But it's starting from a very small base, and if you take out non hydro portion of the renewable sector It's less than 5% so double it triple it quadruple it still means you need 80% something else So our policies even as we need to transfer need to make the transformation We need to keep the conventional system robust and healthy is also because it needs to be with us for a long long time If for no other reason than capital stock Shale gas, this is the other one that's extremely important And this one I would argue that in one of the few places when you look at the industry's perception of things I spent 25 years in the industry and we looked at geologic risk Commercial risk technology risk and geopolitical risk right when we assessed where we were going in certain countries There's basically no exploration risk here when you go to the shales. This is source rock So as opposed to the situation where you saw oil and gas migrating up and then getting caught by a capstone and that's traditional conventional production Accessing this is almost like an industrial process and it's it's the result of technology higher prices Access mostly to private lands, but the ability now to access these reservoirs with horizontal drilling and fracking Has great great potential the most recent estimate for for shale gas deliverability here is 4,000 TCF in the United States 4,000 trillion cubic feet We had the Canadian Energy Resources Board in to CSIS about three weeks ago and they were saying for North America their new estimate is 10,000 TCF To me that's close to infinity 10,000 trillion cubic feet But accessing this is going to be really important and you have to do it the right way has to be responsible development on the surface Casing to prevent Contamination of aquifers and groundwater Well-designed has to be better and then water management at scale clearly needs to improve and this is the responsibility of the industry On a global basis this unconventional gas play is also huge. So this is tight-seeing Colseam gas as well as shales and this afternoon back at the Center for Strategic and International Studies We are hosting the IEA to put out their international gas study and their new story is that global gas is big But again, they're probably 15 years behind the United States because they don't have the infrastructure They don't have the independent sector They don't have the pipelines and the steel makers and the capability to actually do this There's also an issue about whether or not you own the mineral rights whether you can access this in The United States alone when we first started looking at shale gas this goes back two and a half years We saw maybe the top three finds and it started in the Barnett We then went to the magnificent seven in the top ten in the best 12 an hour over 25 So the place seemed to get more prolific the Marcellus alone Which you've all heard of extends from southwest New York State down to Kentucky and the Utica trend Which is above and below the Marcellus in some places may go up to New England into northeastern Canada? Huge resource But the difference between the West and the East is not only so good news bad news You're close to consumption centers and infrastructure, but the east is densely populated. We had different view of property values noise contamination Road construction that kind of thing so it may be a limiting factor the resource base is enormous may not get to exploit it fully and This is the change in circumstances So we constantly talk about this when you start stacking up different oil production and what the prices look like The notion that you can get a lot of new gas and gas liquids in this space of between four and six dollars and MCF Can totally change the dynamics over time So we may not be looking at electrification for fuel We may be looking at gas substitution or gas liquids to go to the refining stream And this is something people are exploring now as gas prices stay low and oil prices keep rising finally on prices We've been looking at the fundamentals the fundamentals of pricing and it used to be traditional fundamentals were oil supply oil demand and inventory Where do you put it and now it's expectations of the future as much as the current situation? Part of its speculation and investment part of it's what policy changes look to make on the horizon Climate change access security Infrastructure timelines are also important all of these things. I would say constitute the new fundamentals Which leads us to the final slide and our final slide and we constructed this for the petroleum council study a couple years ago And this is the notion that that when you balance energy needs you have to look at foreign policy National security at one corner of the triangle Economic needs because that's very important and then the environment but within that space all the debates and trade-offs go on so there's no fuel that has no risk and Requires investment and infrastructure But that's the policy space that we're going to be debating and that's the source of our discussion today And with that I would like to bring forward John Hess. Thank you very much. I think Frank did an excellent job outlining the energy challenge that we have and John and Frank I'm honored to be here. So thank you I will do my best to provide some remarks about the energy landscape, but also maybe some of the Geopolitical security risks that we face as we deal with energy The United States desperately needs an energy policy. It is fundamental to our economic growth our environmental sustainability and national security Current political disruptions are a reminder. We need to secure our energy future. It's paramount to the future of this country We should not wait for a crisis to do something so important to our national interest with five percent of the World's population and 20 percent of its energy use the u.s Has an obligation to lead globally to set the right example at home We must act now industry must do a much better job to educate political leaders and inform the public By the way, one of the reasons I come to an event like this Because we need to be much more informed about the challenges we face and the difficult choices we have yet to make The president also and it's great that Mike is here as well Must lead and set a strategic vision for our country to follow When president Obama took office two years ago, he put climate change at the top of the agenda however to have climate change and Policy associated with it you need an energy policy Unfortunately people confuse climate change policy and energy policy You need both for sustainable development and it starts with energy policy itself I remember speaker Pelosi talking what we just passed the energy bill waxman mark That was not an energy bill It was a climate change bill and we need an energy bill to go along with it And one of the problems is a lot of the political leaders just don't understand the challenges of energy itself So what I'd like to do now is maybe compliment some of the remarks that Frank was talking about just talk about some of the Pragmatic realities that we face when it comes to energy Eighty five percent of the world's energy is hydrocarbons Thirty five percent oil thirty percent coal and twenty percent natural gas The world population is currently estimated to be six point nine billion people and it's estimated to grow to nine billion people by 2050 and again Frank was talking about this thing before most of that's going to be in developing countries and as their living standards improve They will need hydrocarbon energy to provide their economic development Renewable energy is needed and should be encouraged To meet future energy demand and reduce our carbon footprint However, hydrocarbons will fuel world economy for many decades to come Renewable energy does not have the scale the time frame or economics to materially change this outcome as much as we would hope So when we talk about five million green jobs, yes We should have them but don't let that lull you into a false sense of security that we have an energy policy To deal with the hydrocarbon challenge that the world has and our country has We need to encourage renewables wherever possible and add to our portfolio of energy supplies But we have to realize that they are high cost They're going to play a limited role for the next 20 years And we are going to need many incentives to make sure that they have a chance of competing economically in the future an Energy crisis is coming likely to be triggered by oil Demand and and Frank was talking about it is likely to grow in the range of a million to a million and a half barrels per day Driven by the developing economies of the world and the growth in transportation Estimates are that we will go from one billion cars today to two billion cars in 2050 As Frank said, we're not running out of oil trillion barrels have been produced approximately two trillion barrels remaining But we are not investing enough to grow capacity to keep up with demand Frank was also showing that slide that showed 80 percent of the world's reserves being controlled by national oil companies and governments And and not getting access to those reserves Many of those countries are not investing enough to grow their capacity to keep up with the demand projections five and ten years from now World supply capacity Access right now is about three million barrels a day. It was for with Libya without Libya It's about three as demand grows in the next decade. We will not have oil production capacity needed to meet the demand Supply will ration demand and prices will skyrocket $140 per barrel just three years ago was not an aberration It was a warning and we need to wake up about it So what can we do about it in our country? I think we can do a lot Oil is 30% of 37% of US energy demand and the whole story here is about transportation It's about 70% of transportation. So the first thing we should look at is demand Number of political leaders are vilifying producers right left and center whether it's in the country or whether it's internationally That's not good policy. It may be good politics But first we need to take some responsibility We need to conserve more we need to raise mileage performance standards to 50 miles a gallon much higher than the 35 miles a gallon requirement for 2016 and we need clarity on those regulations and we need to get those regulations out there and committed to Focusing on energy efficiency is the best investment we can make Combination of vehicle mix engine downsizing Aerodynamics advanced combustion technology and hybrids, but the key movie here is hybrids Hybrid electric cars as the Chevy Volt and hybrid gasoline cars as a Toyota Prius will go a long way to get us there If we adopted the standard as soon as we can and introduce it over time with the automotive industry and Taking 15 years to replace the vehicle fleet of 230 million cars and like-duty trucks that we have We could save three million barrels a day of oil and at today's price of a hundred dollars a barrel That would save over a hundred billion dollars each year a worthy objective and a worthy price Now there's a lot of promise and talk about electric only battery cars People hoping for specific outcomes for battery powered cars without understanding today's technical technological limitations Really mislead the public Currently the battery challenge is both range and cost range in most cases limited to 40 miles on an eight-hour charge And the cost of more incrementally of about ten thousand dollars per car And that's with automotive companies subsidizing the electric car itself the problem here is physics Energy density of today's best battery is about 200 watt hours per kilogram Versus the energy density of gasoline, which is 13,000 watt hours per kilogram No wonder we have a physical problem in the limitation. So electric only battery cars are important They will serve urban short-distance driving But they're not going to help us in the interstates that we have and the long-distance Family drives that we make especially in the summer and they're not going to play a major role as Battery-only cars in the next 20 years. So hybrids are the technology We should focus on and we should get after it and it will be worth the saving that we make even though It's going to cost us in the short run Now let me talk more about the supply side We need to maintain the tax provisions that incentivize drilling in our country Our country needs to encourage more drilling to increase our energy security will never be energy independent, but we certainly in this whole purpose of this Conference today is about security. So we're talking about energy security here in 2010 the industry spent 135 billion dollars in intangible drilling cost The industry drilled over 40,000 wells most of them on shore by the way These are the current cash operating costs of drilling a well They're not a tax break and they are not a subsidy and there's a lot of misinformation out on this subject So if we have tax reform, we're all for it to make us more competitive Those costs are cash costs and what's also interesting to note is that 90% of the drilling in the u.s Is done by independence The balance by the major oil companies. So if we change the tax provision on Intangible drilling costs, you're going to be hurting the small businesses in this country Not the big oil companies. So it's bad policy and it's misinformed policy Eliminating those IDC's will decrease our domestic supply increase our foreign imports hurt our balance of trade Decrease jobs and decrease energy security. Let's talk about the offshore a little bit We need to encourage more drilling to strengthen energy security Including proper regulatory oversight to ensure the protection of the environment and to reassure the public The McCundo accident was a tragedy with a significant loss of life and continuing environmental impact The Gulf of Mexico currently supplies about 30% of our crude production and 13% of our natural gas Production mostly from the deep water. So when certain people say we gave out permits on shallow water drilling It's meaningless. It's the deep water permits that matter and there we are doing a poor job Even though the government's trying to do better. It is not up to the standards that we as Americans deserve Since the moratoriums been lifted only 15 permits have been granted for new exploration or production wells The government should put the industry back to work Progress is glacial 25 deep water drilling wigs are waiting to return to normal Operations over 200 permits are estimated to be in queue 10 to 20,000 jobs are at stake the rest of the world is drilling and the US is watching and is paralyzed The industry has gone a long way to building spill response capability Meeting the challenge with the marine well containment company and the helix well containment group We need the political leadership and courage in Washington to give the industry the green light to go back to work America deserves better We must do all we can not just here but in the world to increase oil supply While non-OPEC has peaked supply burden in the future will fall on OPEC Specifically Saudi Arabia and Iraq and this is a major security issue. Obviously While we want to reduce our dependence on foreign oil It serves nobody's purpose to vilify those producers or producers here either we need to strengthen our Relationship with those that have the reserves Frank show that 80% chart up there major security issue going forward and obviously this is something that we need to be very mindful of is 25% of the world's oil production is with those midi OPEC countries but two-thirds of those oil reserves are with those countries and 20% of the world's oil production goes through the Straits of Hormuz So there's some major security issues there that we need to think about as a country and how we deal with that Now talk about natural gas for a second Frank talked about shale gas being a game changer And he did a very good explanation talking about the difference in shale as a source of hydrocarbons And and the lower risk geologically of getting access to it the hydraulic fracturing that's out there has been around since 1949 it is not a new recent Technological development those 44,000 wells that are drilled in the United States about 80% of them are hydraulically fractured So as increasing industry activity occurs obviously higher standards are gonna have to be put forward But the states regulate hydraulic fracturing And and outside of one or two rogue companies that aren't up to the snuff of operations The industry has had an outstanding record of safety of not contaminating groundwater and of Environmentally being very secure in their operations. So there's again a lot of misinformation out now shale gas is a game changer It has fundamentally changed the economics of electric generation Natural gas is no longer a bridge fuel, but basically a destination fuel used for power Five years ago shale gas was approximately 5% of US gas production today. It's 30% The United States will be self-sufficient in natural gas for many decades to come rivaling the gas resources of Russia Iran and Qatar and also when you think about security while current oil production For the top 12 OPEC producers is about 40% of the world's production Natural gas is actually more concentrated in fewer hands the top 10 producers including the United States of natural gas Actually are 72% of world production. So as the world needs more natural gas We actually have security issues because even more of those gas reserves are concentrated in fewer hands That will be a problem for us to face. I think over the next 20 years We need to prioritize natural gas for electric generation. It is much lower cost and much higher efficiency To build an electric plant of a thousand megawatts for natural gas It costs about a billion dollars take about a year and a half For those same thousand megawatts coal would cost three billion dollars in three years and nuclear would cost six to eight billion dollars in six To eight years so people talk about nuclear because of clean energy But if we're serious about helping our economy be competitive natural gas is the way to go And so as the United States has about 600 coal plants about a third of which are 50 years or older More and more of our future generation as old generation gets retired should be on natural gas Nuclear while we should preserve our capability for 20% of our Electricity generation to be most economically competitive. I think the future is in the natural gas category and again clarity In terms of what our regulations are so the electric industry can move forward. I think would be helpful on the Government side, but also the industry side Another point. There's some people specifically boon pickings that argue that the government should give about $60,000 a truck subsidy to convert 18 wheelers to natural gas That's just stupid policy You have two million trucks in the United States $60,000 120 billion dollars a year to make trucking companies use something that's worth $30 a barrel Versus $100 a barrel you don't need government incentives, especially in our deficit Environment that we're in to convert trucks or cars or heavy-duty light-duty trucks to natural gas The free market will get us there But the one inconvenient truth that we deal with is that natural gas is much better suited for electric generation If you use it in a power plant you have 40 to 50 percent efficiency if you use it in a car It's 15 percent efficiency so the for the future of our children and our grandchildren It's much smarter to use natural gas for electric generation as opposed to Transportation doesn't mean we shouldn't use it for transportation I think fleet vehicles in cities with small or short distances where the infrastructure is there makes infinite sense now Talking about electricity a little bit need to talk about coal coal is going to be there for the next 50 years The next hundred years people talked about King coal Having its demise after World War two and it's still here the US is self-sufficient in coal So it's going to play a role in electric generation for many years to come. It's 50 percent of US Electric generation right now, but the real issue with coal is it's CO2 footprint Unfortunately Al Gore's words ring true clean coal is like healthy cigarettes. It does not exist So as we go forward Those older coal plants that I talked about they should go to natural gas And that would create a demand for natural gas of somewhere between 15 and 25 percent Incremental from where we are today and we should have the clarity on how we're going to use that gas before we start should start pushing it in terms of transportation usage I Talked about nuclear a little bit the big problem nuclear is the cost issue notwithstanding the recent tragic events in Fukushima So I think we just have to be realistic. We don't want to get rid of nuclear But I don't think it's going to be playing a major role as we go forward. There are few states that are pushing it forward with their Electric utilities the costs are great and some cases the company like scanner in South Carolina is Almost paying for a nuclear plant what their market capitalization is so the cost of nuclear is high and They're just only so many companies that can afford to make that investment I talked about the limited role that renewables will play Wind is about 2% of our power generation if it got to 10 percent in the next 10 years It would be a lot. What's the problem with wind? What's the problem with solar? It's intermittent You're lucky if you get utilization 30% of the time. It's not baseload It's not going to make your car run and it's not going to keep the lights on for 24 hours And and and it's also higher cost Electric power from wind is somewhere between 9 to 11 cents per kilowatt if it's natural gas It's three to five cents a kilowatt that nine to 11 cents gets a tax credit from the government of about two cents We need the wind, but one of the problems is it doesn't blow when you need it quite often and in Texas where there's a surfeit of Electric power from wind what you have found is that last summer on the hottest day in Texas 7,000 megawatts Capacity was there only 600 were available because the wind wasn't blowing so wind is important Solar is important, but we can't lull ourselves in a false sense of security that that's going to be the ultimate answer It plays a role biofuels bad policy someone should do something about it six billion dollars a year to encourage farmers to convert Food to fuel. It's stupid. I don't know why we perpetuate it if we can just keep the rules where they are I think that'll be a step forward last but not least climate change a lot of Aspirations here by a lot of different political leaders recent proposals to reduce the carbon footprint to co2 for emissions by 80% by 2050 it's simply impossible. It's not an oil or gas executive saying oh Climate change doesn't matter. It does matter But we need to be realistic in the targets that we set and we need to integrate as I said before climate change policy with energy policy Princeton study that was done Called the carbon mitigation initiative sets forth the initiatives to mitigate the impact of co2 60 miles a gallon tripling nuclear plants from 400 to 1200 in the world Building 800 CCS plants by the way, there's zero right now That's carbon capture and sequestration and increasing wind power 15 times from the current rate, you know the problem with that in 2050 your co2 footprint will be the same that it is today So if we did all those initiatives and we should We won't be any better than we are today So we just have to be realistic as the world economy grows and it needs hydrocarbons what the impact on co2 is There's a lot we can do to decrease emissions There's a lot we can do to mitigate, but we have to set realistic targets. There is one issue other issue there Even if the US and Europe went to zero China China currently with 10% of the world's GDP we have 25% already emits more co2 than we do and Left unabated China will probably triple their co2 emissions of their economy grows between now and 2050 I would say that's a security issue too So we have to get them in the tent I know my colleague here is trying to influence them on co2 I support those efforts, and I think the G20 is a perfect way to try to increase our influence over them Because we all live on the same earth. We all share the same resources But right now we're on a collision course just in terms of co2 I think we're also on another security collision course because they make energy policy an integral part of their National security and of their foreign policy Just in the last three years China has spent $45 billion across the world to buy oil and gas reserves. They've done it in Canada They've done some here. They've done it in Latin America. They've done it in Asia, and they've done it in Africa So our country better wake up that there's a scramble for resources out there, and that's another reason we need an energy policy So in conclusion Energy and climate change have been called the greatest challenge we face in the 21st century We can no longer pursue short-term political agendas. We must collaborate Democrats Republicans government in industry the United States and the rest of the world For the common good We need to set the example here at home, and we also need to make it a top agenda item It was it's fallen down. I'm hoping it can get back in the top five and we also can do it for the G 20 We needed an energy policy that Decreases the demand for oil encourages more drilling Emphasizes natural gas for electric generation Invest in research for new forms of energy and sets realistic targets for reduction in co2 emissions If we do that we conserve over conserve over three million barrels a day a hundred billion dollars a year and reduce our not only Carbon footprint, but also start doing something about our deficit our country needs a leadership from both industry and Government and together we can create an energy future that secures our economic growth for the future generations. Thank you very much So when we invited John, let me just say that that we thought he would be thoughtful provocative and entertaining and I can say check check check Nice job Phil sharp is joining us this morning as well So Phil in his current role as president of resources for the future. We've done a lot of work with RFF Many of you out there have done it as well I resources for the future not taking anything away from CSIS does one of the best jobs of economic Energy and environment work in town They gave the administration Billy Pizer Joe Aldi a number of different people that worked out serious thought On how to go forward on some of these issues. So it's my pleasure to welcome Phil sharp Thank you very much Frank and thank you so much for inviting me here Frankly as a former member of Congress. I'm happy to be invited about anywhere but This morning I was asked if I would make a few comments sort of about global energy and Environmental issues that begin to have a security consequence and I'm going to try to do that in just a very broad at the stratospheric level where you can rarely make a mistake when you're at that high and flying an airplane the Comments and then bring it down and talk of make just a couple quick comments one about natural gas Which is a clear theme here this morning and the other about nuclear Let me just say in the broad context when I was a graduate student in the last millennium Georgetown University, this was the 1960s one of our the United Nations our Ambassador to the United Nations coined the phrase revolution of rising expectation Revolution of rising expectations as a way to describe what was happening in the non-developed world Which at that point was most of the rest of the world other than Europe and the United States and Japan kind of proposition and So we never could find Non patronizing terms for that part of the world in the most American conversation They were viewed as undeveloped or underdeveloped or developing or something of the sort, but the point was He was trying and the US government was trying to get more National attention to the importance of this part of the world very large part of the world But the primary focus in the American foreign policy and security establishment was naturally on the question of what was the Soviet Union doing What was the impact on the competition between the United States in the West and the Soviet Union communism and capitalism? And so that was the overwhelming focus and lens and by the way Most of the parts of the world did not seem to have high relevance for us oil in the Middle East various strategic points in the Where ships flow and things of this sort, but frankly it was not the highest order of a security issue Well today the revolution of right rising expectations actually has more relevance because we have seen a Radical change in what is expected and what is happening in much of the rest of the world and indeed that was what Frank and then John too. We're talking about these enormous developments Abroad and these are on the realm of economics where Something that almost nobody predicted back in that era was the radical shift in the way India China Brazil and others are now leading the global economic Engine Essentially there we see it now of course on the political front where we're getting a special Current revolution in the North Africa and the Middle East Where there are different kinds of expectations for what people want in political leadership and interesting enough We also see it on the environmental front a phenomenon that is has been documented. It's pretty universal in Social development and that is once economies get going Citizens who get what we would call middle class in America begin to demand that Oh, I want that water to be cleaner from the health of my children and myself I want that air to be cleaner. I begin to demand quality of life Expectations and as we know this is an intense issue that China is dealing with in which the popular Expectation at least in certain factions in certain geographic areas is intense over that the government is having to deal with Well at heart and soul we recognize that in fact we've coupled Significant population growth and trends with significant economic development and the consequences of that of course are Manyfold, but one is the intensification of global competition for resources Whether it's energy water or food and we see also because of the scale of human activity very significant in position and damage to the environment around the globe Because simply the scale of our activities both some individual activities But the collective is enormous on our resources and on our our environment Now there are two very large Commons there may be one may Commons problems meaning that these go well beyond anybody's ability to unilaterally Control what is important to them and one is the atmosphere and the others the oceans You can think of perhaps other regional ones, but in which it what we do Contributes to matters, but as John was even saying on the climate issue obviously without the engagement of China and others We are doomed to not be able to make a significant shift in what we are putting in the atmosphere And of course in terms of the atmosphere climate is one of those things which we won't go into here But the other that is I think going to be a growing sense of of international Conflict in some places there's be Nations that sit next to each other, but it is in fact what people are putting up in the end into the environment Out of industrialization going on around the world. We have done it to the Mexicans and the Canadians They have done it to us. We have done it to Europe But now we're we're able to monitor mercury coming from China and other kinds of things not to mention We were able to pick up the the nuclear response in in On the east coast of the United States. We can tell there had been an accident in Japan wasn't viewed as a health-threatening thing In any way shape or form here, but the point is what happens elsewhere is not irrelevant And I think we're going to see multiple conflicts around the world over this whether they reach the point of Military is a whole nother question, but they certain are things that governments are going to be Called on to deal with and of course the oceans where we face overfishing and we face over dumping It is the grand sewer in which we think that we can dump all around the world all kinds of stuff And because of its size for a long time frankly We probably could but we're beginning to recognize that the scale of human activities is actually changing the chemistry of our Atmosphere and of our oceans and we're not quite sure what all those consequences are from Alarmists who think it's really going to be devastating on both fronts to others who take a more casual view but the issue is that I'm trying to suggest is this is a changed world and and the shift that I've mentioned on economics and politics is also as Frank said it is the players that we have seen a huge shift in only a decade or two decades of where the Financial and political power has arisen in what used to call When I was a student the developing world well Let me change to to the Bring the plane down a little bit and talk about Natural gas and and nuclear in particular first of all I think the natural gas has the potential to be in this country and around the globe a Changer great game changer in the things and of course we have the issues of access that we've got to deal with here to make That so and it's clearly in the United States market going to have an effect on the development of other resources coal Renewables and nuclear which John outlined and it has an effect on our potential to do something about The climate change, but there is lots of policy development that has to occur in order for this resource And it's potential to be capitalized now the interesting question is is whether or not it's going to have and John articulated how the concentration of gas sources may may be something on the horizon Globally concentration that is going to be of concern to us one thing you will notice is we are going to be big players in that no matter what Is happening elsewhere, and we're certainly leading in that today? Let me suggest you there are lots of ramifications. We are yet to work out I mean Poland wants to aggressively go after this I don't know what their real potential is but they're excited about that potential and they certainly see as and that them being an alternative to Russian gas or at least Not a direct alternative just fact that they're there And I would suggest to you that one of the profound things here is whatever speed we would develop these at They are there and they are known to be there as resources and they're going to be a magnet to Economic and political leadership for the next 10 20 30 40 years So whether they get developed next year or not they're always there as a potential check I think the interesting question is whether it'll ever be sufficient to actually check what happens in the oil market It certainly is going to have an effect on the other markets, and it may well have a effect on pricing in oil Ultimately, but there are many uncertainties with this, and I think there is one Lesson of humility partly I tried to articulate it in what I said before about the where how the world changed But it is our ability to see what the world is going to look like 25 years from now Is really quite limited and we were had a radically different world we were dealing with in the 1960s when I was a student and We by the way when it came to natural gas in 2004 when the Republican president or public in Congress dealt with an energy bill and Aggressively move forward with the US energy policy They assume natural gas was not a growing phenomenon in the United States in 2007 when we got the other we got 2005 and we got the 2007 bill which was both parties were involved because there was a Redistribution of power in Congress guess what same attitude We got to get liquefied natural gas into the country because we don't have this supply beginning to hear sounds that maybe this was a supply 2009 with a stimulus package There was more belief that it was out there But certainly it was not part of the debate over what had to be developed the point is this comes as a Huge change in the way we think about organize and the potential Consequence of the real results and we generally didn't know it it also by the way Advertises why it is so important one to keep research going in the private and public sector and to Keep a reasonably open market place Because if you had asked the big oil companies if they were investing in this they would have pretty much said no way We don't think it's gonna happen. It's not where the big stuff is and what we had was Independent smaller companies who went out there placed the bet against some of their friends and colleagues laughing at them and They made not only money for themselves. They made a big change for this country and for the world But there are many uncertainties that lie ahead. Let me turn quickly to a nuclear because in the and suggest here a more concrete thing about How the United States and other governments need to Aggressively move sees this opportunity given the severe accident at Fukushima First of all, this is the opportunity now for industry for government even NGOs to help us build a better stronger set of Institutions private and public on an international saying in order to help assure the safety of these plants and It has the potential also mean that nuclear can be a part of our future Supply because we don't know how we're going to meet everything in 2050 whether it's for emissions or For energy supply and here there are techniques that are underway But need to be strengthened in information sharing They need to be strengthened in best practices that go on and very importantly in Effective oversight by regulators and by private the regulatory system in the United States one of the most effective institutions that Industry is developed in conjunction with government. It's called impo And well, it's like everything else imperfect in the world. It has had a huge discipline in effect It's counterpart on the international themes called one. Oh, it's a much weaker kind of thing Which is the world? Association of nuclear operators, but this is the opportunity to strengthen that the same with the IAEA And and the NRC This is a tough tough Technology that takes constant discipline constant oversight and constant allowing for critics to raise questions about it But it has performed and it's a marvelous amount of energy out of a very small Quantity of material and it has at least for the climate it has Carbon-free, so I think we're probably not going to I certainly personally would never advocate that we rule it off as an option In the future, but we should seize this opportunity now and this requires leadership at the State Department It requires leadership in the industry and this is there are many of these things actually Underway and I think we need to seize the moment to help Effectively over that well, let me just quickly close by saying the obvious Which is what John Frank have said on the world scene and the kind of things this country and other countries are going to have Governments are going to have to deal with and everybody else to deal with our large energy and environmental questions over the next several decades and I Think what that one means back here at home is that we need to be alert within the u.s Government and those who deal around the government with making sure we are building the intellectual and and Administrative capacities in our foreign establishment our foreign policy and security establishment to be able to effectively and persistently Stay on these topics and be very careful that just because we don't have a crisis We starve the resources in these critical agencies. Well, thank you very much Thanks, Phil. I feel brought up a couple of a couple of great points But this notion of where governments are vertically organized and companies are vertically organized How do you deal with transnational threats that are really horizontal and that's one of the things we want to get into He's also the classic person and that exemplifies kind of the dual-headed nature of this town What he didn't tell you is that he also chairs the policy group on the National Petroleum Council resource study Which I know from experience is Good news and bad news it eats up your life, but it's a great intellectual pursuit You talked about the government industry Collaboration and how the government needs to get its act in order in dealing with climate change in the economy and energy And we have the person that's going to talk to you now and give us all the answers on that It's my great pleasure to introduce Mike from Well, thank you Frank and unlike John and Phil I've not been steeped in energy policy for for decades As he was kind enough to introduce Phil Referencing his decades in fact most of what I know about energy has come from Frank And so I viewed this more as a final exam rather than a presentation as he's been my tutor here I apologize. You may have seen us violently blackbearing back and forth here a Few minutes ago, you know, it's an interesting time to be meeting the OPEC meeting in Vienna just broke without an agreement and Minister Naimi described it to the press as the worst meeting. He's been to So it's an interesting time for us to be talking about these issues Between that between the historic changes going on in the Middle East and North Africa the increasing demand from emerging economies as Frank laid out the triple emergency in Japan the mixed economic news in the US in Europe and around the world and Oil and gasoline prices here that are having a significant impact on American families on consumers on consumer confidence, which in turn has an effect on the broader on the broader economic growth projections Frank described my job of being at this nexus of National security and economics domestic and international and I guess I do want to emphasize that that is the way the administration Views these issues We see a nexus between national security and economic security That to project the sort of power and influence we wish to project around the world We need to have a strong US economy and that US economy is dependent in turn on a strong open rules-based Global economy so much of what we do is focused on trying to support that global economy But that economy is also that economic security is also dependent on Energy security and that energy security is related to climate change and that climate change is related back to national security So all of these things in fact are interconnected and we can no longer afford to look at things in a vertical way But we do need to look at things in a horizontal way John was kind enough to suggest we get a an energy policy for the administration So I thought I'd take a minute or two to lay out what we think our energy policy is And actually it was terrific. He is if I got it right John He said he needs to have drilling gas clean energy in a realistic approach to climate change And that happens to track my remarks directly. So I don't even have to I don't have to reorder it You may have seen the president's speech at Georgetown University a couple of months ago and the blueprint for a secure energy future That was laid out at the same time and that's a pragmatic policy That we believe is based on three principles one is safe and responsible Oil and gas development both domestically and internationally Promoting energy efficiency in commercial and residential buildings efficient cars and trucks Etc. And thirdly innovating towards ultimately a clean energy future But even as we strive for that clean energy future We remain very conscious of the fact that we will in the short and the medium term be dependent on oil and that Is a reality that we that defines our energy that defines a good portion of our energy policy At step one that said the fact that we import almost 50 percent Of the oil we use and export four hundred billion dollars per year creates a meaningful economic and national security issue as John and others have lay out and that's been highlighted by the recent turmoil in the Middle East as a result we've placed a great deal of emphasis on Working to secure stable and secure sources of supply both domestically and internationally Mindful of the Macondo oil spill We have worked to ensure the future exploration is done in line with the lessons learned from that example And while my numbers don't exactly track John's but I'm gonna do some research on John's We believe that since the moratorium has been lifted that we have been trying to expedite the approval of Gulf permits consistent with those new higher Safety standards and working with companies to try and do so as as quickly as possible We were also working to expand exploration in Alaska and the Gulf And we have tried to structure or we're working to structure the leases in such a way with the Department of Interior so that Companies get rewarded for diligent exploration and development under those leases Internationally we're working with Mexico on a trans boundary agreement that will allow us to facilitate the safe and responsible development of oil resources that flow under both our Borders we've commenced a strategic partnership with Brazil to begin a dialogue about The whole range of energy issues with Brazil but including very much the pre salt resources and how we can bring our safety technology to bear there and participate In the development of those resources and just this week the State Department wrapped up the public comment period For the supplemental draft environmental impact statement for the Keystone Pipeline and expects to reach a decision on that one way or the other By the end of the year a natural gas which which Frank Explained very well. We view this really as a potential game changer But if we're going to take advantage of these new fines to We need to get fracking right and While John is right. This is this is the vast majority of players in this area do a very responsible job There are great concerns out there about both safety and environmental Issues and we need to make sure that we're bringing together as Secretary Chu is now doing environmental industry and state regulatory experts to make recommendations about best practices and About how to improve safety and environmental performance One thing that was just mentioned in passing But it could be that shale oil proves to be as much of a game-changer in this regard as shale gas Over the long term and we see that as having great potential again if we can get the fracking right Our interest in natural gas is not limited domestically as as Phil mentioned with regard to Poland There are vast resources abroad and we've launched a global Gas shale initiative to work with countries like Poland like India and others who want to develop their own shale gas resources and begin to change the mix and the the patterns of supply and demand and in just the last couple of weeks the Department of Energy Issued its first ever permit to export domestic natural gas from a lower 48 to a non FTA Country so we have a comprehensive policy excuse me that goes from drilling safety here To expanding resources here to working internationally with major potential suppliers to Exploiting the natural gas opportunities Safely and securely there is of course also our clean energy agenda, and I won't go into it in a great depth I think you have probably heard that that before about the the resources invested in clean energy innovation Through the Recovery Act and and since but let me say a word about about climate change And I won't go into detail and Frank had a good slide about the national security implications Of climate change, but it does go to this issue of the changing or the tectonic shifts in the in the environment And that that all of the speakers have touched upon In our view We cannot solve climate change Without China India Brazil and the major emerging economies being part of the solution And we have tried to take a very pragmatic approach to the UN negotiations and the other fora to Create mechanisms by which all major economies all major emitters Would have a seat at the table, but also have a series of responsibilities for addressing for addressing climate change We recognize that India China and the countries in the Middle East will account for the greatest part of the increased demand for resources in the future and with that comes a series of responsibilities, so from from From Copenhagen to Cancun to Durban you I think have seen a the beginnings of a Framework where both developing and developed countries take on certain responsibilities Those responsibilities may be somewhat different, but they each have commitments Where there's mitigation where this transparency As well as finance and technology to address the broad range of Climate change issues and this is part of a larger thrust of our broader national security policy way beyond Economics or energy or climate change, which is the recognition of the role of the major emerging economies in the global system As a whole we think that's a good thing that the rise of the emerging economies is a positive development For the international system. We want to create opportunities for the major emerging economies to play a greater Role in the international system, but with that role comes Responsibilities and that's why we committed to institutionalizing the G20 as the premier forum for international Economic cooperation. It was born out of the financial crisis, but it is evolving and it's still a work in progress It's evolving into a forum where you have the major developed countries and the major emerging economies Sitting at the table together and working through the difficult issues of what it means to have Balance and sustainable global growth going forward what sort of financial regulation to put in place to avoid the sort of crises that that we went through and Increasingly how to deal with other transnational issues So we may have a slight different point of view on on tax credits But having the G20 look at fossil fuel subsidies and and the inefficient fossil fuel subsidies that are used in many developing as well as developed countries that encourage the overuse of Fossil fuels is something that the G20 has taken on and we're making Step-by-step progress and increasingly other energy and commodity related issues are finding their way onto the G20 agenda so that forum is becoming one mechanism by which we are integrating the major emerging economies and Working with them to take on greater responsibilities for the international system. I mentioned the climate change Forum as another one from again Copenhagen being a major breakthrough in terms of developed and developing countries working together To to try and solve the problem the same thing is true of the Doha trade talks where we have insisted that the major emerging economies play a role and contribute to the International trading system in a way that is commensurate with the size of their economy and their role in the global economy There's much more to do in this regard Raw materials policy commodity policies resource diplomacy as some mentioned Development policy more generally. These are issues whether it's China's going out strategy and how that relates to their energy policy Or other issues that we want to bring into the G20 or into other similar for and begin to create some discipline around those, you know, let me conclude by just saying About about oil prices current oil prices and oil markets. We are concerned about the impact of current oil prices on the global economic recovery and we are monitoring it closely. We understand there are lots of reasons that go into Making those prices We think it's important for producers and consumers to have a strong dialogue about how best to deal with this And of course as the president has said we retain all the various tools. We have at our disposal for how to deal with this as well Finally just in conclusion just the the evolving security environment that Frank has referred to and laid out well in the framing In the framing slides is one that will define our activity going forward this interconnection between national security and economic security between economic security and energy security between that climate change is a seamless series of Concerns and initiatives that have to be pursued Simultaneously it involves a broader role a broader array of countries that have traditionally been At the at the center of attention and we need to find better and more effective ways of Dealing with them and it requires us being willing to use all the tools and resources at our disposal both domestically and internationally to try and solve these problems Okay, so we seem to have reached a commonality of the complexity of the waterfront here Two things Mike asked to go back to the White House So we're gonna abbreviate the Q&A session what we had intended to do was to sit out and have a discussion Then we would open up for questions Let me just pose one question to all three of our panelists while you are all Formulating your questions because we actually get more out of the give and take that we get in the audiences And that question would be so there's long-term trends and implications Of what we do in the next 12 to 24 months What can we do better? What do you see happening on the environmental economic given our deficit reduction? targets and energy fronts and Where can we go to actually put ourselves in a better position? So I guess I'll start with John I Discussed to talk about what can we do now because I do think we need more clarity on what we can do now On the demand side, I really think being clear about the automotive standards working with the automotive industry to really push Conservation to put the higher miles per gallon. So I think we're too slow on that I realize the automotive industry is coming out of you know a near Death experience, but having said that I don't think we can wait I think we really need to get hybrid technology out there be it in SUVs or be it in smaller cars. That's number one number two I mentioned the offshore we need to put the offshore back to work that we have to do that And I also think we cannot take policies that will reduce drilling in this country We need to increase drilling in this country. So I think those are specific things natural gas You know just being clear on going forward the role of natural gas and electric generation I think also could accelerate our economic security So just to stand that for a second Would you advocate that the industry stepping up like they did a marine spill to kind of move the wall for? Yeah, I think the industry has been slow out of the gates I mean the industry is for the most part done a good job on hydraulic fracturing going back to 1949 having said that it is a public policy issue right and the industry shouldn't be on its back feet It should be on its front feet I know John Deutsch is working on and I know your group is working on it So I do think there's certain things federally we can do I think just like we're going to have a group for industry standards and practices for the offshore We should have it for the onshore, but we shouldn't over-regulate because the states do a good job So I think maybe having a superstructure on what the standards are and maybe having some group that audits those standards is good We're gonna do it in the offshore. We should do it in the onshore The industry should be a little more forward-leaning on that one Great, so you want to talk a little bit about Capitol Hill and then I can branch out to generally agree with John said it seems improbable. We'll see any grand initiatives on energy policy out of it Difficult political situation in the country where both sides are trying to establish who really has But I think there are going to be some important opportunities to sort out we have adopted a plethora of Policies over those last six or eight years of interventions in the economy some of them are worthy and worth keeping many of them probably have questions and The point is going to come to a head is what are the expenditures? We're making and what are the the tax expenditures? We're making on energy and there needs to be some fast sorting out I've strongly urged the administration to decide as quickly as they can which of those things are worth fighting for and the industry by the way, too Which are worth fighting for and trying to preserve and give up The others because we've got a severe deficit a problem, but one thing is I would hope we would at least keep our eye on trying to get technological Long-term investment Continue in terms of our R&D. It's always hard to know how you manage it effectively But but make sure we do not drop the ball on that as a minimum kind of proposition I do think on the nuclear thing We just have a number of things that we have to be highly focused on that's with the both the industry and the nuclear Registrar Commission are in the follow-up to Fukushima to decide Whether there are any significant changes for current plants or plant life extension or Or even on the new designs that are on the board that may or may not pan out in the marketplace kind of thing So those need to be Resolved, but you can't do that High-speed you've got to do that We're not gonna make a decision the way Germany did Yes or go Kind of thing so there are several of these things that and I do think I'm a natural gas So the sooner and I'm glad to see the administration is trying to pull people together sooner We can get some clarity on how far we we really to go so that we can make sure industry Others can go forward. I think that's a very useful thing. Finally. I just say look We need the Environmental Protection Agency to carefully pick the most flexible path as they try to impose carbon rules in this That path is not my or most people's preferred way to do this We'd be better off to have a pricing strategy that gave a lot of time and took the Incentives in our capital society, but it's the only one on the board and if they manage that well It can work It's not the ideal way to go and it can give some clarity to the fact that we're going forward now Frankly, most of you the utility industry and most people of most industries know it's only a matter of time that we're gonna have Carbon constraints of some sort they thought it was gonna come earlier until the failure last year Hey Mike, where would you like to be a year from now? other than the Bahamas Like I think Just to follow on what John Phil said I think if all these things are urgent to get done But I think if we can come up with a fracturing answer that makes sense to provide clarity So that people can make investment decisions accordingly, that would be very important. I think Continuing to take a pragmatic approach and building out Through the next round will be in Durban the climate change framework that sort of Creates concreteness around the commitments of China India Brazil and others and puts in transparency mechanisms as well Sort of taking pragmatic steps on all these fronts to move forward That would be a good set of developments Excellent. All right, so let me do this We're going to take three quietest questions from the audience We'll then offer them to our panelists to respond We have two simple rules here one is identify yourself You're gonna have to wait for the mic because it's a big room and to the extent that you can pose your question in the Form of a question that would also be really helpful. So we'll start on this side If you could stand up so the mics and get to it would be great Andrew Riles general electric as we seek to solve this security dilemma and by reducing imports of hydrocarbons We're using hybrid electric vehicles renewable technologies energy-efficient technologies Those all require large amounts of rare earth metals currently supplied by one country 95% of which for one country he would use it to that as a political and economic tool I was hoping you could trust the US government's focus on this issue as you know So we don't create one new energy security threat as you seek to solve the other one Excellent point. Okay. So the the rare earth minerals. Okay, then we'll go right to the middle here on the aisle gentlemen with the They're coming from behind you Ed Berger, let me focus on the issue of demand and particularly the transportation sector you all made eloquent to comments about the importance of reducing the the Increasing the efficiency of Transportation, but none of you has addressed the issue of mass transportation in fact replacing or supplementing the use of the Transportation of both goods and people around the country. I think we should think about that Okay, and we'll take third question all the way in the back At this question is from mr. Frohman a Tom dogged with Reuters I just wanted to get your thoughts on OPEC's decision today not to raise output What does that say about the US influence with Saudi Arabia? Because I know the US and the IEA other Western countries that urged OPEC to increase output Because of expected higher demand in the second half of the year and have we lost? Are we now in a battle with OPEC and do you expect the Saudis to step up and increase output on their own? All right, so I'm happy to do the OPEC first of that. I'll let Mike work on rare earth You know There's a lot of misinformation about who's producing what? The world oil market is not under supplied OPEC had had a production target For the OPEC 11 Iraq's out of that for 12 of about 24 and a half million barrels a day They've been producing way in excess of that for the last several years as the world economy including our own country has recovered So, you know, I would say in that the country that should be most Complimented and appreciated is Saudi Arabia because they have increased their production to meet the world oil demand and as Libby went down Saudi Arabia went up Numbers of Saudi Arabia production now are probably between 9.2 and 9.5 million barrels a day During the economic crisis. It was between seven and a half and eight million barrels a day So the world is getting the oil it needs OPEC may not have the political optics it needs because for whatever the reasons may be Venezuela and Iran have a very different political agenda than Saudi Arabia does but Saudi Arabia is truly the Federal Reserve of oil prices It has to maintain the supply the world needs for price stability. So regardless of not having an agreement I think the oil will be produced I think Saudi will be at the front of making sure the world has price stability. So while the organization is going through Difficulties now in terms of getting alignment They've had these difficulties before but in the meantime Saudi will play the leadership role that it has and will continue to play I'm going to disappoint my friends from Reuters by simply say I'm not gonna get any public comment So I can actually go back to the office and evaluate what's actually been said But we'll be back in touch later. No doubt boy. Picky. Picky. Picky So our numbers show that the OPEC production was at least a million and a half two million barrels a day Above quota for the OPEC 11 and there's only a handful of companies or countries with spare capacity And we know who they are and a lot of the Hawks are the ones that don't have spare capacity So at these price levels you would expect that they would continue, but Minister Naimi is going to make a statement Clearly as John was pointing out There is a distinction between the formal public announcements and agreements and the real world activity And in fact even those numbers that we put out or put out regularly are always questioned It's hard enough to get accurate numbers within the United States let alone Universally, so it's just a cautionary note that don't put too much stock in American politics or foreign politics and what is said, but what is done Rare earth elements and the different supply chains for renewables and also for refinery catalysts. Well, I would only I'd simply say It's been interesting to see the reaction in the rare earths world so the developments over the last year or so In that area, I mean as you know, I'm sure you know rare earths or anything but rare they do exist in many places and The prospect of supply potentially being disrupted has led companies from California to Russia to elsewhere to begin to develop Them as quickly as possible. So it's a case in which Prospect of interruption has led to a reaction by the private sector and I'd also say we're in dialogue Through the G20 and elsewhere With a whole range of countries about raw materials generally restrictions on raw materials generally including rare earths That's a that's one of the solvable problems Pretty usually and pretty quickly actually because they're not really rare We're stars All right master you get to do public transport. Oh, well public art. We didn't and it certainly is relevant And but I think it has a broader relevance that the question is is whether we want to have a modern infrastructure in this country or not And I think part of any modern industrial society is to have some kind of light rail or for rail Transportation system and I think we ought to wise up to it And that's a good economic stimulus thing that we could have been investing in and could and of course They did try to invest in some super high speed rail by the way I wrote on the trains that everybody has here probably and out of Beijing and it's Phenomenal and everything like that But of course now the stories we're hearing is there all kinds of problems quality control and speeds having to be slowed down and various construction problems, so It doesn't work all perfectly you've got it working well Final thought John well On the subject in general or or just mass transportation. No just on the subject in general I think our country is a great country and it is a time for us to rise to the occasion of leadership Both for future generations as well as the world. I know we're up to it and there is more commonality in the beliefs, but I think we need to Translate those concepts to action and that's where I think we're dragging in part because of the partisan Politics and in part because some of these are tough decisions And I hope our business and political leadership have the courage to make the tough decisions To get this country on the right track in terms of energy security The closing comment yeah, yeah, no, I think I mean we have serious intellectual work and serious political work to do For the future China is providing us an enormously valuable service And that is it is the only thing that seems to unite this society at the moment in Washington It's the constant discussion about China and either they're doing phenomenal things or they're screwing it up Or their threat or whatever it is and they're doing for us what the Japanese did in the 1980s Which was it was amazing how they were going to totally surpass us and take over China's a larger threat in that regard If you see that as a threat then Japan was but the reality is we're going to I hope begin to make decisions That focus on these issues more hard in part because of China And dr. Fromm I Agree with all that I think America's a great country we do need to rise to these challenges. We have a lot of work to do and As Phil said, I think what's most important is that we do get Government politics business the environmental community all the stakeholders working together on these things whether it's What all these none of these issues can be solved by one sector alone and we need everybody Pulling to get them to get them solved so that was my line on collaboration if you could all join me in thanking this an exceptional panel