:00:11. > :00:15.Obama. Much more to come.
:00:15. > :00:21.Not so long ago it seemed the world's addiction to fossil fuels
:00:21. > :00:25.would be ended by a dwindling supply. But that would was before
:00:26. > :00:30.fracking, tar sands and deep-sea exploration has transformed
:00:30. > :00:36.calculations about global reserves of oil and gas. My guest today,
:00:36. > :00:40.Fatih Birol, was one of the world's most influential analysts of the
:00:40. > :00:43.global energy market and its effect on the economy and environment. Is
:00:43. > :00:53.the resilience of fossil fuel supply a cause for celebration or
:00:53. > :01:18.
:01:18. > :01:25.despair? Welcome to HARDtalk. You write some
:01:25. > :01:32.of the most anticipated analyses of the world energy market there is.
:01:32. > :01:36.Are they really worth the paper they are written on? If you look at
:01:36. > :01:43.the energy Publications, it is the most recognised publication in the
:01:43. > :01:49.world, it is the bible of the energy world. It provides in size
:01:49. > :01:55.for energy companies, governments, citizens, for NGOs, for everybody.
:01:55. > :01:58.Look at the reality of the energy market. To be fair and to be honest,
:01:58. > :02:03.you have completely failed to predict some of the most important
:02:03. > :02:08.friends that we see today. You did not know that America is going to
:02:08. > :02:14.find a vast reserves of gas through this new fracking progress, that
:02:14. > :02:19.was not something that you were writing on. We were the first ones.
:02:19. > :02:24.We said there is a silent revolution starting in the US.
:02:24. > :02:31.if you go back to those reports, DG predict the effect it would have on
:02:31. > :02:37.the US and international energy market? Are was a silent revolution.
:02:37. > :02:41.When you look at the US government, they could see it was happening, a
:02:41. > :02:48.many people in the West thought they were going to import the
:02:48. > :02:52.natural gas and they are not in a position to export natural gas, and
:02:52. > :02:58.we successfully saw this turning point. You might claim some credit
:02:58. > :03:03.there. What about the fact that in the mid- 2000, you were convinced
:03:03. > :03:10.that the point, the watershed point of Peter oil production was either
:03:10. > :03:18.happening or about to happen. That was wrong. Conventional oil
:03:18. > :03:23.production is about to peak in 2007, and then the oil production will
:03:23. > :03:33.come from unconventional methods. So you made a distinction between
:03:33. > :03:35.
:03:35. > :03:39.conventional and unconventional oil. When you wrote about peak oil as
:03:39. > :03:43.you did, it was a signal to the market that you believed that
:03:43. > :03:48.friendly oil production had reached a peak and was going to cross the
:03:48. > :03:50.watershed and begin a long downward slope. Because of the rise of so
:03:50. > :03:58.many different technological processes that have allowed tar
:03:58. > :04:06.sands to be exploited, that was not right. We said that conventional
:04:06. > :04:13.oil production was about to peak, but the total oil production... we
:04:13. > :04:17.estimate it to breached 100 million euros a day, as so the growth comes
:04:17. > :04:25.from the unconventional oil, and the conventional oil, it is no
:04:25. > :04:30.longer stable. It peaked in 2007- 2008. Just to pin you down on some
:04:30. > :04:34.of your current forecasting, we have already touched about the
:04:34. > :04:41.transformation of the energy sector in the West, how far is that going
:04:41. > :04:50.to go? How close to being self- sufficient in energy, fossil fuel
:04:50. > :04:55.production, is the US going to get? The US is making giant Steps. One
:04:55. > :05:00.of them is the growth in domestic production, oil and natural gas,
:05:00. > :05:06.and the second one, which is most of the time not majestic, it is the
:05:07. > :05:09.domestic consumption of oil in the US is declining. Self-sufficiency
:05:09. > :05:17.is a combined effort of increasing production and decreasing
:05:17. > :05:23.consumption. It is a result of Obama's Investment, introducing
:05:24. > :05:29.fuel efficient standards for cars, a car in the US, for 100 kilometres,
:05:29. > :05:35.it uses about nine litres of gasoline. In Europe, it is about
:05:35. > :05:41.six. There is a big difference. What the administration is trying
:05:41. > :05:48.to do now, to increase the efficiency of the cars, to use less
:05:48. > :05:54.coy or, less petrol, in order to improve energy security. We believe
:05:54. > :06:01.that our number show, in 20 years, the US will breach energy security
:06:01. > :06:07.and independence. -- will reach. a sense, the answer you have given
:06:07. > :06:11.me is just in -- intriguing. It brings us back to the
:06:11. > :06:18.unpredictability of technology. You believe they will go further
:06:18. > :06:25.towards energy efficiency and that not know that. That is just a
:06:25. > :06:29.prediction. It is a prediction but based on the policy decisions made
:06:29. > :06:35.by the administration. The government set some standards and
:06:35. > :06:38.the manufacturing industry has to adopt bird that -- those standards.
:06:38. > :06:43.Let's look at some other unpredictable things, and see where
:06:43. > :06:48.they are going. You have talked about the vast potential of oil and
:06:48. > :06:53.gas reserves in the Arctic region, across the Arctic Circle. He said
:06:53. > :06:59.that they could represent up to 15% of all recoverable oil and gas
:06:59. > :07:05.reserves in the planet. But how do you know that they are actually
:07:05. > :07:11.recoverable? Look at some of the problems that Shell is looking at,
:07:11. > :07:18.with a week that has run aground. It is difficult work. How do you
:07:18. > :07:26.know it will be successful? I would not bet that it is successful.
:07:26. > :07:30.There are two problems. Given the current oil crisis, given the
:07:30. > :07:34.current technology, I would not expect that in the next 20 years
:07:34. > :07:39.there will be significant production growth from the Arctic
:07:39. > :07:44.region. Do you think some of the big oil companies had estimated the
:07:44. > :07:49.potential and the ease to which they could access fossil fuels?
:07:49. > :07:57.they believe they have significant prop it -- profit, I would say they
:07:57. > :08:01.are on the optimistic side. seashell, another company of
:08:01. > :08:07.Greenland, I wonder whether you think this notion of an arctic
:08:07. > :08:13.revolution is overblown. I think it is not an issue of Today and not
:08:13. > :08:18.tomorrow, the day after tomorrow. There have been other things that
:08:18. > :08:22.are unknown which put question marks over the valley of your
:08:22. > :08:26.analyses. One of your other key pillars of futurology for the
:08:26. > :08:32.industry is Iraq. You say there is no question that when it comes to
:08:32. > :08:37.the growth in the oil business, the right is going to have up to 45% of
:08:37. > :08:44.the growth. Had the look at what is happening in Iraq and the problems
:08:44. > :08:52.they have got in the industry? very much so. I was in Iraq several
:08:52. > :09:00.times last year. I was talking to people, guv you know how unhappy
:09:00. > :09:05.many of the oil companies are? In the middle of so much energy
:09:05. > :09:12.richness, Australia -- it right is just trying to get eight hours of
:09:12. > :09:17.electricity. But it is very cheap to produce oil. To get one barrel
:09:18. > :09:22.in Iraq is about ten times cheaper than Russia. Almost 15 times
:09:22. > :09:28.cheaper than the North Sea. The resources are there. The technology
:09:29. > :09:34.is there. The problem is stability and the agreement of Baghdad... if
:09:34. > :09:42.it is done, there are very good reasons to push everybody there to
:09:42. > :09:48.have a consensus on this issue. Iraq may be a major oil economy and
:09:48. > :09:54.can be the second largest producer. This brings us back to where we
:09:54. > :09:59.began, with the notion of peak oil. It seems much less important today.
:10:00. > :10:04.To quote the CEO of one of the biggest oil companies in Europe, he
:10:05. > :10:12.said the notion of peak oil is not a relevant subject any more. Do you
:10:12. > :10:18.agree with him? I think we will not see a peak in production in the
:10:18. > :10:25.next 20 years. If the prices around the same. When you say we are not
:10:25. > :10:29.going to see a peak, you say that production can continue to grow?
:10:29. > :10:34.Especially coming from unconventional oil. However, it is
:10:34. > :10:42.not in everybody's interest to see oil production, gas production, to
:10:42. > :10:46.grow so much because we have climate change. The energy sector
:10:46. > :10:51.is the most important sector when it comes to climate change, because
:10:51. > :10:57.more than two-thirds of the missions causing climate change
:10:57. > :11:02.comes from the US using coal, oil and natural gas. I was always
:11:02. > :11:06.intending to get to this issue of climate change in relation to the
:11:06. > :11:11.energy sector. You have brought it to our attention right now. It
:11:11. > :11:15.makes me wonder why you use some of the language you do we talk about
:11:15. > :11:21.the expansion phase, you talk about a golden era for the gas industry,
:11:21. > :11:26.for example. In many ways it is not a golden area, it is a bleak area,
:11:26. > :11:33.if you believe that this reliance on fossil fuels is hampering all of
:11:33. > :11:43.the planet's efforts to combat climate change. It is a golden age
:11:43. > :11:43.
:11:43. > :11:49.for natural gas, you will see a lot of growth in natural gas. Second,
:11:49. > :11:57.if natural gas is to replace Cole, it is a good thing. But it is as
:11:57. > :12:03.well as, it is not replacing. some countries it is not. Among all
:12:03. > :12:10.the countries in the world, the largest reduction in emissions
:12:10. > :12:14.comes from the West. Natural gas replaced coal, and the largest
:12:14. > :12:18.production of carbon emissions comes from the West, which does not
:12:18. > :12:23.have a carbon policy. In Europe, there is a climate policy and we
:12:23. > :12:31.did not see such a D production. The natural gas alone is not the
:12:31. > :12:34.answer. Far from being the answer, many people would idea that it is
:12:34. > :12:40.part of the problem. The price signal on gas suggest that you
:12:40. > :12:46.should invest in gas. The price signal in oil says that you should
:12:46. > :12:52.invest in oil. The Investment is taking away from Reno ball energy,
:12:52. > :12:56.and that is a fundamental problem. -- renewable. If you look at many
:12:56. > :13:03.of the companies involved in wind energy, title and wave power
:13:03. > :13:07.projects, they are not getting the cash they need. In the last ten
:13:07. > :13:13.years, renewable energy investment increased every year. Only last
:13:13. > :13:21.year we saw a decline. If renewable energy investment would not grow,
:13:21. > :13:25.we have no chance to arrest climate change. There is a role for the
:13:25. > :13:32.governments. They should take it seriously and put out a framework
:13:32. > :13:36.for renewable energy to grow, and tried to invest... and the change
:13:36. > :13:40.in the fossil fuel picture she not affect governments to change their
:13:40. > :13:46.policies in terms of their support for renewable energy investments.
:13:46. > :13:51.But the problem is the price signal. How do you change the price
:13:51. > :13:55.signals? The EU have to find a way of raising the price of fossil
:13:55. > :14:00.fuels, both the plentiful natural gas and oil, to send a signal to
:14:00. > :14:04.the market which says, when you buy these products, you have got to
:14:04. > :14:11.factor in the cost of the damage that they do.
:14:11. > :14:15.Beyond that, in many countries, where the energy demand comes from,
:14:15. > :14:21.fossil fuel products are subsidised. They are especially cheap. In the
:14:21. > :14:28.Gulf region, one-litre is about a sense. They are very cheap.
:14:28. > :14:34.Globally, we have about half a trillion US dollars as subsidies
:14:34. > :14:39.for fossil fuels in order to bring them and -- to an air than take his
:14:39. > :14:48.position. The first thing we have to do is to phase out the subsidies.
:14:48. > :14:53.So there is room for renewables to You have seen what happens in
:14:53. > :15:03.country like Nigeria, Jordan, the Middle East. When they tried to
:15:03. > :15:12.reduce subsidies on fuel, you have riots, political unrest. That is
:15:12. > :15:22.what happens. Exactly. The trouble is, $500 billion, many governments
:15:22. > :15:24.
:15:24. > :15:31.say we have the subsidies to protect the poor. We have analysed,
:15:31. > :15:39.8% of this $500 billion goes to the lowest 20% income earners. A maybe
:15:39. > :15:45.you should be telling your members, the International Energy Agency,
:15:45. > :15:52.made up of America, the Europeans, maybe they should stop subsidising
:15:52. > :16:00.the coal industry. This is our number one... They are not
:16:00. > :16:10.listening. Some of them are listening. Germany is making steps,
:16:10. > :16:10.
:16:10. > :16:17.Poland is making steps. Otherwise we have double standards. What do
:16:17. > :16:23.you say to your members who appear to have made a strategic decision
:16:23. > :16:29.to move away from nuclear. We see in Germany, Italy, a bunch of other
:16:29. > :16:34.countries since the Fukushima disaster, public policy has moved
:16:34. > :16:38.away from civilian nuclear power. A fundamental mistake? It depends on
:16:38. > :16:43.the country and the political context. If governments want to
:16:43. > :16:49.move away from nuclear power, it is up to them. Our analysis shows it
:16:49. > :16:54.may not be a wise decision. The cost of energy, the cost of
:16:54. > :17:01.electricity in those countries will go up. The prices will go up.
:17:01. > :17:08.Nuclear energy, if you replace them with renewables, a natural gas, the
:17:08. > :17:17.price of electricity will go up. Nuclear energy produces electricity
:17:17. > :17:22.without emissions. It has got other environmental problems. Exactly.
:17:22. > :17:26.Reaching environment targets will be even harder. From the point of
:17:26. > :17:31.view of competitiveness and climate change to leave nuclear power may
:17:31. > :17:37.not be a wise decision. I think it is a decision some governments
:17:37. > :17:42.should reconsider... You talk about competitiveness. The market is
:17:42. > :17:47.sending signals that your analysis may be haywire. In the UK, the
:17:47. > :17:53.government wants to see new nuclear investment. It is desperate to see
:17:53. > :17:57.replacement generation capacity for the retiring nuclear plants. It
:17:57. > :18:02.cannot convince many of the big players, whether it is German,
:18:02. > :18:07.French or Chinese investors, it is going to make economic sense to put
:18:07. > :18:11.new money into nuclear power. depends on the government. What
:18:11. > :18:21.kind of framework Arie going to see? You think they should
:18:21. > :18:22.
:18:22. > :18:31.subsidise? I do not think lifetime subsidies... May be licensing and
:18:31. > :18:36.other things. When it comes to non- fossil fuel energies, I think there
:18:36. > :18:41.is a need for governments to play a role to give a boost to that kind
:18:41. > :18:48.of technology. It seems to me, the fundamental problem you have got,
:18:48. > :18:52.your member nation states, the US, Europeans and others, who consume
:18:52. > :18:57.energy, want the cheapest energy they can get their hands on. Right
:18:57. > :19:03.now, for the foreseeable future, that looks like fossil-fuel energy.
:19:03. > :19:07.As long as that is the case all of your warning noises about climate
:19:07. > :19:17.change are not going to change the basic economic vacuolation these
:19:17. > :19:21.
:19:21. > :19:26.governments make. -- calculation. We need to put a price on carbon.
:19:26. > :19:36.If this price is not set, it will be very difficult to leave the
:19:36. > :19:36.
:19:36. > :19:40.fossil fuels and make investments in a low carbon technologies.
:19:40. > :19:44.you believe that so passionately, it is fascinating that you are
:19:44. > :19:54.saying things that many of the environmental lobby say as well. If
:19:54. > :19:55.
:19:55. > :20:05.you believe that, why is I a -- IAEA so keen to keep international
:20:05. > :20:06.
:20:06. > :20:11.oil prices steady, stable and quite low. During the Libyan civil war,
:20:11. > :20:21.you put 60 million barrels of oil onto the market. Why do you do
:20:21. > :20:23.
:20:23. > :20:33.that? Why not let the price rise? When we had the first of four in
:20:33. > :20:37.
:20:37. > :20:45.the early 90s... -- Gulf War. We had Hurricane Katrina. It is just
:20:45. > :20:52.to bridge the gap. Why do it? Why not embrace disruptions to the
:20:52. > :20:56.market? The fact that oil prices might rise dramatically? This is
:20:56. > :21:02.the market running. Relying on fossil fuels in the future is not
:21:02. > :21:12.sustainable. If it is a result of a market development we do not touch
:21:12. > :21:12.
:21:12. > :21:22.it. If it is a physical... A war, a natural disaster, so on. Climate
:21:22. > :21:24.
:21:24. > :21:26.change and others need stable price signals such as the carbon price.
:21:26. > :21:36.What we need is higher energy prices as a result of setting a
:21:36. > :21:36.
:21:36. > :21:45.carbon and also phasing out of fossil fuel subsidies. In Europe we
:21:45. > :21:55.have carbon prices of about $10. Fossil fuel subsidies mean hundred
:21:55. > :21:57.
:21:57. > :22:01.and $10 every ton of CO2... $110. How Heide you believe the oil price
:22:01. > :22:06.has to go for it to send a signal to really change the nature of the
:22:06. > :22:11.energy market place. -- high. According to our numbers and we
:22:11. > :22:18.need a carbon price. You keep talking about that. Let's keep it
:22:18. > :22:21.simple. Let's talk about the price of crude oil. People know it has
:22:21. > :22:29.been over $100 a barrel for a long time. How much higher does it have
:22:29. > :22:32.to go to change the way we use oil. In order to see a change on the
:22:32. > :22:38.climate change front, we do not see an increase in the international
:22:38. > :22:44.oil prices. We can put a tax to increase the prices. That is the
:22:44. > :22:49.way to do it? The carbon tax? What do you think is going to happen to
:22:49. > :22:55.the price of oil? We have the possibility of conflict over Iran's
:22:55. > :23:00.nuclear ambitions. What is going to 12 next
:23:00. > :23:10.12 months? There are very few races to see oil prices go down
:23:10. > :23:17.
:23:17. > :23:21.substantially the --. -- reasons. The US is growing. I hope, looking
:23:21. > :23:25.at the global economic recovery situation it will not go higher
:23:25. > :23:31.majorbe a major problem for the global
:23:31. > :23:36.economic recovery. Let's leave with a longer term thought. You do not
:23:36. > :23:39.see for the moment the political will to impose the sort of carbon
:23:39. > :23:44.charges that are necessary in the long-term? Are you pessimistic
:23:44. > :23:54.about the long-term future? To be honest, I'm becoming more and more
:23:54. > :23:59.pessimistic. When you look at the trends we are in line with a
:23:59. > :24:06.temperature increase of six degrees. That will have devastating effects
:24:06. > :24:10.for all of us. Despite the warnings we have unfortunately we are
:24:10. > :24:20.following a terrible trend. If there are no major international
:24:20. > :24:23.agreements the very soon around 2017, five years from now, we may
:24:23. > :24:29.locking our energy infrastructure and say goodbye to our current
:24:29. > :24:33.lifestyle. We were made to think about how we can cope with a new
:24:33. > :24:39.lifestyle. Potter, much more frequent weather events, in some