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MA: So it s the national oil company in Saudi Arabia. Its name used to be ARAMCO and it stands for Arabian American Oil Company. In the 30s, right under the nose of the British, U.S. oil businessmen realize that Saudi Arabia had tremendous oil resources. And up until the 80s, it remained a U.S. company. And that was the prime jewel of the U.S. oil empire. Why is that? Very simple, because Mother Nature happened to give the largest oil reserves to the Saudis. The Saudi king made this deal with Roosevelt. On the way back from the Yalta Conference in 1944, Roosevelt stopped along the Suez Canal to settle this historical deal which is usually summarized as oil for security.
But even after that, Saudi Arabia and Washington kept a very close relationship. For instance, al-Qaida is one of the direct results of this intimate and intricate and sometimes scary relationship. And up until today, most of the American presidents, when they arrive in the White House, their first trip is to go to Saudi Arabia. So that trivial fact gives you the reason why Saudi Arabia, a very remote desert, despotic country, is at the center of the policy of the most powerful nation in the world.
RF: One question that comes to mind is how central is understanding oil in understanding why the U.S. and Western allies have been fighting wars in this region for so long.
MA: My answer to this is very simple. If you want to remain in power, you need energy. That s a basic fact. Right now with the whole shale oil boom in the U.S., this mindset is changing a little bit. People in the U.S. are saying, we have oil now again, we no longer need to fight wars that nobody understands with a strange agenda of trying to remain at the top of the game around the Persian Gulf.
So we fought many wars for access to oil when oil was plentiful. You have to wonder what s going to happen when oil becomes and it will become a scarce resource.
But I would argue that this is not going to last because the thirst for oil all around the world remains and it remains very high in the U.S. It s very hard to be certain that the shale oil that is booming right now is going to remain for this for several decades. The trouble is that oil is an exhaustible resource at some point. The faster you empty your glass, the faster it’s empty. Mad Max is not just a bad nightmare. It s a reality for several countries in the world. When you look at Venezuela, its production is decreasing. When you look at China, not many people know that China is a very large oil producer. But it s passed its so-called peak oil, and its production is declining. So we fought many wars for access to oil when oil was plentiful. You have to wonder what s going to happen when oil becomes and it will become a scarce resource.
RF: I live in a region where there s a lot of this unconventional oil and gas, mainly natural gas. You see these drilling rigs all over the place. I wonder how much the shale revolution has changed this paradigm. It sounds like you don t think it s changed all that much.
MA: That’s the big question. Conventional oil production, which brings to the market 3/4ths of the production, it has passed its historical peak production. It s in decline. And you have many, many regions in the world that are in decline Algeria, Venezuela, China, the North Sea. So you can look at the shale oil and gas phenomenon as a solution to this problem of conventional oil production decreasing for a geological reason. You can look at it as a solution or as a symptom. A century ago, the place of birth of the whole U.S. oil industry was Pennsylvania. That production peaked in the late 19th century and that oil has been exhausted for a long time.
And the source rock in which shale producers are tapping to exploit and produce shale oil is the actual source rock of the conventional oil that is now exhausted. So we have to remember that and zoom back on the proper historical scale. You have this boom that s been going on for 10 years; is it going to last 10 more years? There are many doubts not only from environmentalists but observers of the industry like geologists who say that the shale oil boom is going to be on a plateau and level off as of next year.
RF: So there are these twin crises in this story. One is, of course, climate change. But another is this question of are we going to reach peak oil and be in a world where there s less and less oil available for use. How do you see this playing out in the next few years or decades?
MA: I don t do predictions. So the peak of conventional oil production was passed in 2008, according to the International in Energy Agency. The quantity of oil that we discover each year is less than the quantity of all that we consume. So it s not rocket science to figure that this will have an end at some point and possibly an unpleasant ending if we are not cautious enough.
The most optimistic predictions, Exxon Mobile for instance, say that peak oil will probably happen in the 2040s. The less optimistic put the date during this decade. For instance, the International Energy Agency, which is very important in this discussion, says that we would need to triple the production of shale oil worldwide in order to compensate for the decline of conventional oil production. And if we don t do that, we will have a possible supply crunch around the year 2025.
So when you have one of the most important sources of information regarding this issue saying that we are at the risk of facing a supply crunch worldwide in the year 2025, you need to be cautious. You needed to take that question seriously.
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