TEN YEARS HENCE
Ten Points about Oil Production
MARCH 18, 2005
On March 18, 2005, Ross Pillari, president of BP America presented a lecture titled, "Oil and Peace," which included the following excerpts:
- The early 20th century marked a turning point in oil's global role. The onset of the automobile era and the age of flight changed how nations regarded their own security, leading to alliances, military actions and economic embargos that hastened World War II. But from the end of the 19th century to the beginning of the 20th century, oil and the new combustion engine drove economic development and efforts toward peace.
- If no oil or gas reserves were located after today, we'd have a 50- to 60-year supply to work with. But new technology will help us access supplies from already-identified pools.
- The recent upward shift in oil prices can be tied to growth in demand, particularly in the United States and China. By 2020, world oil demand will grow by 32 percent, while demand for natural gas will rise a remarkable 48 percent.
- Three regions—West Africa, Russia and the Middle East—will supply 80 percent of traded oil within the next decade, while reliance on imports by the United States, Europe and China will only increase.
- Renewables and alternative energy sources will not make much of a dent in meeting global energy needs by 2020. The contribution from solar, wind, hydrogen and biomass will rise, but will produce only 4 percent of total demand.
- Geopolitical interventions increasingly will affect supply and demand in the next decade. Because several producing nations will face societal, political and economic transitions in the next few years, we can expect more non-market-based pressures on trade. These can be neither predicted nor managed.
- To restore long-term energy security, the United States must redefine energy independence in the post-Sept. 11 world. Optimization of domestic supplies should be part of a strategy of interdependence, not geographic self-sufficiency.
- Restoring security also means that the United States must help oil-producing countries complete the transition to stable governments and educate them on transparent business practices.
- Further energy solutions include diversifying sources of oil supply via exploration and development in Latin America, West Africa, North Africa, Indonesia and Russia.
- The United States must set a no-nonsense national energy strategy that includes boosting refining capability to deal with the 20-plus grades of gas used, enforcing efficiency measures and educating consumers so that they will demand fuel-efficient autos.
Ross Pillari is a member of the board of directors of the American Petroleum Institute, the Chicago Symphony Orchestra, the Foreign Policy Association, the Alliance to Save Energy and the Baker Institute Energy Forum.
Editor's Note (Oct. 27, 2006): Pillari stepped down as BP president and chairman in June 2006.