interview > greene > greene 18
Greene 18 (3:49)
Topic(s): Foreign Oil / Government
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It's disturbing that we have struggled with the
problem of oil dependence for 30 years, almost 35 years, and there's
still enormous confusion about what that problem is and how to solve it. The
key to the problem of oil dependence is OPEC, and OPEC's ability to
control the market. Sometimes they have more power in the market than in other
times. It depends on their market share, mostly. And as a result of that market
power, they charge higher prices for petroleum. They can cause price shocks or
they can capitalize on price shocks and just keep the price high, as
they're doing now, by cutting back production. But they are the essence
of our oil dependence problem. And we pay for that in damage to our economy
when there are price shocks, and we pay for it in transfer of wealth to
essentially monopoly producers.
It costs the Saudis a couple of dollars a barrel, for
example, to produce a barrel of oil and we pay $70, $60 a barrel for that oil.
All of the difference is profit, pure profit for them. It doesn't have to
go back into producing more oil, it can go to anything. And the same for Iran,
although they cost a little more to produce oil. Same for Kuwait, and so on.
There's an enormous surplus profit to those countries in a barrel of oil.
But the market power of those countries is not unlimited.
In order to keep the price high, they have to keep cutting back production. And
as they cut back production, they lose market share. And as they lose market
share, they lose market power. And we saw that as— when the world
responded to the oil price shocks in '73-74, '79-80, by passing
fuel economy standards in developing countries around the world, and as the
market responded to the higher prices, the market share of OPEC just went down
and down and down and down. And finally, in 1986, oil prices collapsed because
they had lost so much market share, they weren't able to control the
market anymore. But because they have two-thirds to three-quarters of the
world's preserves of oil, eventually they'll come back unless we keep being more efficient, we keep developing alternatives
and bringing them on market, and we increase our ability to respond to high
Now, that whole experience of their manipulation of the
oil market has cost our economy about $4 trillion over the past 30 years. We
know how to solve the problem, but we don't keep at— we
didn't have— we— well, in effect, we solved this problem of oil dependence
in 1986. But we said, "Well, maybe there never was a problem. Maybe OPEC
was just a mirage," and we stopped increasing fuel economy standards, we
stopped conserving oil, and we stopped our— well, we didn't stop,
but we reduced our efforts to develop alternatives. And as a result, the
problem came back and it will in the future. We can solve it again and
it'll come back unless we keep going. And I think that's the path
we have to take. We have to keep improving energy efficiency year after year.
We have to keep developing new technology. We have to keep developing
alternatives to petroleum. Because now we have not only to deal with oil
dependence, but climate change and climate change is not going to go away in 10
or 20 years.