>> next on book tv, andrew scott cooper discusses the oil deal made between the ford administration and the saudi government in 1976, an effort to undercut the power of opec, and the impact it had on the shah's regime in iran. this is about an hour.

>> good evening and welcome to the gerald r. ford presidential library. i am the archivist. we are pleased to have you here this evening. i have the privilege of introducing our speaker, andrew scott cooper, author of "the oil kings: how the u.s., iran, and saudia arabia changed the balance of power in the middle east." and it comes to us from new zealand where he is finishing his ph.d program, or his ph.d in american history at victoria university. he has advanced degrees in journalism and strategic studies, and has worked as a human rights investigator and college administrator. in "the oil kings," his first book, he examines american iranian and saudi oil policies from 1969-1977. during this crucial eight-year period, america went from being

the worlds largest producer producer of oil to its largest importer of oil, and saudi arabia supplanted iran as washington's most important islamic ally in the persian gulf. at the center of "the oil kings," the shah of iran who gambled his countries economic future on high oil prices and ultimately lost his hold on power. andrew has received high marks for his insightful analysis, and wide use of original interviews and formally classified materials as he opens the window on this important period in history. in the process he is also produced the most thorough account yet of president ford's handling of relations with the shah, king faisal, and oil philosophy. please join me in welcoming andrew scott cooper. [applause]

>> thank you, geir, and thank you to the gerald r. ford presidential library for hosting the and for making my research and this wonderful even possible. you may have heard the expression it's good to be king, well, tonight it's good to be a historian for oil diplomacy and oil dependency. "the new york times" published an op-ed on oil dependency and "the wall street journal" published one on the history, history studies in creating a dynamic worst force. tonight we bridge to areas of public interest. it's a rare and wonderful thing for a historian to watch events our only speculate about a generation ago and finally come to pass more than three decades later. five years ago when i began my research into u.s. oil diplomacy

in the 1970s, i was puzzled by references made in documents from 1976 that read like something out of a financial thriller. there was talk of a sudden increase in oil prices triggering a global financial crisis. the bankruptcy of countries in southern europe, international default crisis, double dip recession indiana state, unemployment over 9%, and the possible collapse of big banks on wall street. 35 years later, and here we are. global recession induced in large part by soaring oil prices, the bankruptcy or near insolvency of the countries in europe, bank failures and bailouts at home and abroad. the united states economy on the brink of a double-dip recession, unemployment over 9%. those who cannot remember the past are condemned to repeat it.

we are certainly repeating it today. parallels between the earlier period that is the focus of my research and our own time were brought home to me most vividly during my recent state increase where i wrote "the oil kings." in may 2010, the day after violent protests in athens against the government austerity package i walked through the center of town past burned-out buildings and vehicles trying to comprehend what had obviously gone so badly wrong for the greek people. it seemed incomprehensible the same country that hosted the summer olympic games would have bankrupted itself in a space of just six short years. and be at the center of a contagion shaking global financial networks and threatening the survival of european and american banks. during my walk through athens i wonder why the crisis had spiraled so far beyond the

control of any single statement or international agency. why were our biggest banks so vulnerable to defense being played out in a small country in the balkans? how did the regulatory agencies get it so badly wrong? at almost every level, however one looks at it, picture resembled in institutional crisis and structural breakdown. then there was the question of leadership. but unlike most analysts i wasn't thinking about how the current leaders in power in washington, paris and london were reacting to events. i was thinking about another president and another time. i was thinking about gerald ford. in particular i was thinking about a conversation president for head in the oval office of the white house in december 1976 with the iranian ambassador to washington. in that conversation, president ford explained to the ambassador

that he needed the help of the shah of iran to stop opec, the cartel to represent oil producers from approving another big increase in the price of oil. at that time the shah was this country's most important middle east ally. so much so that the shah was known by admirers and critics alike as america's shah. opec was due to meet in a few days time to calculate the size of the price increase for the following year. the shah had made it clear to ford that he believed oil was undervalued in price, and that western consumers could afford to pay 15% more for the imports of persian gulf crude oil. he had already brushed aside a letter from ford asking him to rethink his position. the president's meeting with the shah and ambassador was a final attempt to make the iranian leaders seem reason.

that is why i ask you to come in quietly, ford said the transit fare i want no confrontation and that's what this meeting is private. in a meeting the president was joined by alan greenspan who at that time served as chairman of the council of economic advisers. and also by national security advisor scowcroft who took notes. together, ford and greenspan tried to convey to transfix what they feared might happen if oil prices went up by 15%. the economies of the western industrialized world were still absorbing the oil shock of three years earlier. many of you remember that time in 1973, oil prices quadrupled, destabilizing the world economy and triggering the deepest recession in the united states. since the 1930s. it up and the people out of work and cost big corporations like pan am to appeal to the federal government for bailout money. in europe at that time soaring

fuel costs have helped drive portugal's economy to the wall and weaken the economy for spain, greece, italy and great britain for the point where the governments were forced to appeal to international lenders for financial lifelines. with the resources of international lending agencies like the international monetary fund and the world bank all but exhausted these countries have turned to private banks in the united states to help them meet their internal and external spending obligations and commitments. big banks on wall street including bank of america, cd, jason morgan had rushed to fill a gap to the point that they were now in turn dangerously overextended and vulnerable to a single default somewhere along the lines. in a rare moment of candor, at that time morgan's president publicly admitted quote, in a greedy drive for profit american banks in the early 1970s made

bad loans and real estate investments, and for other questionable purposes. see why i love my research? [laughter] wall street was not anxiously awaiting the outcome of the opec meeting that was due in a few days time after ford's meeting with zahedi, because everyone understood that another big increase in oil prices might be the trigger for default, contagion and collapse. now, to further complicate matters from president ford at this time, other countries in southern europe had only recently thrown off the shackles of years of authoritarian rule. they were trying to transition to western-style democracy. this is portugal, spain increase. while burdened with underperforming economies soaring levels of inflation and unemployment and political unrest from white ring and left wing extremist. the ford administration was particularly worked out for nato allies, italy, spain, portugal

and great britain. italy's communist party was exploiting economic discontent to try and maneuver its way into a coalition government. britain's government meanwhile, had warned washington that it was on the verge of running out of cash. if the imf turned down its appeal for another loan, said the prime minister, he would have to implement an austerity program so harsh there would be riots in the streets of london. the governments of spain and portugal were effectively broke, and in danger of being ousted by extremists. said president ford to the ambassador, the situation is very serious. in increase in oil price adds to the danger of a financial crisis. failure in government, even to endanger and military crisis. this is in the context of the cold war. how did things get so bad that in december 1976 president of

the united states had to appeal to the ambassador of a developing country to help save u.s. and western economies and banks from a financial meltdown? well, it turns out the united states economy had been expected to generate enough growth the first half of 1976 to pull itself out of recession and lift the economy and its allies in its wake. but something happened on the road to economic recovery. 18 months earlier the ford administration had disagreed over the federal spending package. the result satisfied no one. conservatives opposed to stem spending in its entirety and liberals complained more or less was needed. in the event, billions of dollars set aside for federal stimulus programs went unspent. in fact, the federal government outspent by nsa $15 billion which was a huge dollar amount at the time.

it reminded some and less of a previous miscalculations from 1976 when lyndon johnson's administration under estimate the costs of the vietnam war by $10 billion cause a blowout in the federal budget with an inflationary results. 11 years later, complained one observer, the federal budget was quote in the state of chaos. a shortfall in steamy spending helped create a condition in which u.s. economy instead of taking off have projected by greenspan and the administration plateaued and pause and appeared headed for a nosedive in the fall of a double dip recession at the end of 1976 into 1977. that many u.s. imports would tail off and that would play still further pressure on already struggling european economies. the second half of 1976 was dubbed the greenspan poorest. he gave it that thing. alan greenspan was forced to admit the u.s. economy was not

growing as fast as he had assumed it would earlier in the year. in fact, he conceded it wasn't going at all. it had paused. it was greenspan who won the president that the economy was so fragile that even a 50% increase in the price of oil might be enough to take the economy back into recession with the risk of government that there's and bank collapses. in the oval office that day, greenspan explained to the iranian about her zahedi that there was so much chaos in the financial system that the lending flexibility of the big banks had vanished and financial networks around the world were stretched thin. he added that huge increase in debt taken on after 1973 when oil consumers have tried to borrow their way out of the fiscal hole they found themselves in had badly shaken the confidence of markets,

governments and big business. it was essential he said that the shah of iran shared restraint on oil price. when i first read that transcript now more than four years ago, and a full year and have before lehman brothers collapse, i was frankly perplexed. in fact, i could not place the conversation with any coherent framework because if what i was reading was right in late 1976, the president was admitting that the u.s. banking system, economy and the economies of its european allies were so fragile and so overextended that even a 50% increase in the price of oil could cause panic and bring down the banks and break countries in southern europe. so you can ask what did all this have to do with u.s. oil diplomacy with iran and saudi arabia. that was the subject of my research, after all. i've never heard of a banking scare in 1976 before, and certainly had not expected to

find one. there's no reference to the episode into memoirs of the former administration officials that i'm aware of it. and histories from that period and apparently make no reference to it, again that i'm aware of the. so try and put the context of the transcript, put it in some context. i had to broaden the focus of my research well beyond the narrow confines of u.s. oil relations with iran and saudi arabia in the 1970s. i started to look at the whole subject of oil in a much more holistic way. by studying the impact rising oil price had in the 1970s on the economies of countries like the united states, portugal, greece, italy and spain. but also because of coaches like south vietnam, tanzania, sri lanka, canada and chile. taking the force conversation as my starting point, i am of my research investigation back in

time hoping to locate the moment when it looked to me as though things decided to go wrong. the stargate if you will of the road that led to president ford's confrontation with the shah of oil prices in his final weeks in office. that meant i had to move back in time past the recession, past watergate, nixon's resignation, beyond the arab oil embargo, past the vietnam war, the 1972 presidential election, indeed, bachus for as the shah of iran's visit to washington to attend the funeral of former president eisenhower in 1959. that's the point in which my book begins. in the fall of 2008, three years ago now, during the financial collapse i remember watching news footage of the lehman brothers failure of lehman brothers, and thinking this sounds familiar. as each month passed and as each phase of the financial crisis

gave way to a new ominous one than the last, this crisis still moving in the face is now. i began to wonder if i was watching gerald ford's words? in our the 1976 start to play itself out. until that time it had occurred to me that modernization states could go bankrupt. individuals can be declared bankrupt by entire countries? it seemed unfathomable here but there we were, and there they were lined up in a row of dominoes about to fall onto each other. iceland, greece, ireland, portugal, spain and now italy are in trouble. i watched with fascination as financial instability claimed banks and corporations. and then as afford it spoke about in his meeting with zahedi, the social unrest began. there were riots in, governments were ousted in iceland, ireland, portugal and britain.

and i remember thinking perhaps i could offer insights that i was in new zealand, recovering from spinal surgery and i thought what could i do, i'll 911 and report a historical emergency? [laughter] no one will listen to me. this raises a big question about the role historians can play in our fast-moving contemporary society with its fixation on the now and the superficial. during my research for "the oil kings" i interviewed a highly respected washington-based military strategist. i asked him to explain to me how the united states became so weak and in the 1970s in this crucial period where gerald ford is president and he this situation and has to manage it. and soon the conversation with this individual. on to other subjects and inevitably we got into the middle east and u.s. invasion of iraq in 2003. i asked him, what did he think

have gone wrong? where did he think it all gone wrong? he explained to me that usually when there's a foreign policy crisis in washington the administration often invites and experts in the country or the region that is the subject of dispute. these experts include historians, linguists and cultural and religious studies scholars. they are invited to ask and answer questions from officials who are trying to decide the best way to respond to the issue they are trying to deal with. however that apparently did not happen in the run up to the invasion of iraq in 2003. historians were not invited to share their views because the administration and office had already decided on a course of action, regardless of the facts. that change, however, in the summer of 2003 when u.s. troops were attacked and the united

nations compound in baghdad was bombed. suddenly, the experts received invitations, we need to talk to you. in other words, the experts were not called in and tell the disaster had already started to unfold. and by that time it was too late. this individual told me he had came to the meaning in which the participants were shocked at the ignorance of the officials were briefing them. they knew next to nothing about iraq as for iraq's make or the turtle divisions within the country. and until then they hadn't regarded them as particularly relevant. and we want something to happen so badly that we ignore all evidence to the contrary, we thought magical thinking. and a kind of magical thinking on display over iraq can be seen today in the way we relate to oil. and i'm not referring merely to this country's reliance on foreign supply of oil, but to the commodity itself which we

have allowed to dominate our lives and determine our destiny. if it's not obvious by now, it should be. it's not coincidence that the american century coincided with the age of oil. which many experts believe is winding down, the age of oil and talking about. from the end of world war ii until the mid 1970s, low oil prices made possible the postwar economic miracle that saw the united states enjoy several decades unparalleled economic growth and prosperity. the first evidence of a downside to this codependency, oil and prosperity, came during the first oil shock which is the subject of my book. during my research i came across a fascinating memo written by alan greenspan and address to the nelson rockefeller. president ford's vice president at the time. dated january 1975, greenspan's memo was a well-intentioned but remarkably naïve appeal to

politicians in washington to engage in some straight talk with the american people. in it he explained that rising oil prices have permanently altered the national economy and that there could be no going back to the days of the 1960s when in his words, a base of our society and the base of our economy was secure. he continued, now the real world against to press on average a american and could very well devastate family life and standards of living if we do not confront our longer-term problems and protect the united states from the ever increasing dangers to which it is becoming exposed. the united states, said greenspan, had to confront its addiction to oil. the immediate profit is what although i would list our national defense posture and fiscal erosion as critically important, he said it is important for the american people to understand how the oil crisis emerged, what it is, and what our potential consequences,

why, if we do not come to grips with. that was in 1975. 36 years later, and that is a conversation still to be had with the american people. statistics can become mind numbing after a while, but the reality is this country consumes more oil than any other. 22% of the world's oil production per year. let's go back to 2005, and the latest phase of the oil price roller coaster we've all been on in recent years. at that time, oil prices from 2005-2008, oil prices doubled the oil was selling for $75 a barrel in the summer 2007, shot up as high as $147 a barrel a year later. now, i don't know about you but to me that sounds like an oil shock, that wasn't talked about at the time. no one mentions the phrase oil shock. oil prices, oil price increases

can be absorbed by consumer economy if they are gradual and moderate. slow increases in the price of oil à la governments, businesses and consumers to adjust their spending patterns of behavior, but sudden spikes in the price of oil can cause real structural damage. like the doctor at new york university and professor james hamilton of the university of california at san diego, and as result of my research i believe that soaring oil prices played an important part in overloading the u.s. economy in 2007, and severely destabilizing financial networks and banks. it wasn't the sole cause. it may not been the biggest cause, but you can't ignore that it was one of the causes of this current financial crisis where all stock and. oil prices were and continue to be one of the top contributing factors to this crisis.

the parallels of the oil shock in the mid 1970s are unmistakable. professor hamilton has drawn a link between the 2007 mortgage foreclosure crisis and high oil prices. in testimony before the joint economic committee to the congress, he described how $4 a gallon gas prices in 200 2007 lo a sudden change in consumer spending patterns, and that these changes disrupted key economic sectors. he gave the example of the demand for automobiles that shade half percentage point off gdp between 2007-2008. americans he said on average about 140 billion gallons on gasoline a year. so if oil goes up 1 dollar plus, that means they lost $140 billion in consumer purchasing power.

as oil prices rocketed, incomes fell and jobs were lost as the economy slowed down. intriguingly, professor hamilton told congress that quote, we saw the biggest initial decline in house prices and increases in delinquencies in areas farthest from the urban cores suggesting the interaction between housing demand and commuting costs. one's house prices declined and the liquid seas reached a sufficient level, the solvency of key financial institutions tended to be doubted. he concluded his testimony with his uncomfortable observation. the reality is that no policy could have prevented a substantial increase in the price of oil between 2005 and the first part 2008. the point is making is the days when this country where any single country could influence or manipulate the world's oil supply in markets are over.

the entry of china into the global energy market in the 2000s led to the same tightening of market conditions that result when the the united states entered the oil market as a consumer in the early 1970s. it may seem hard to believe, but as late as, as recently as 1970 the united states was the world's biggest oil producer. that quickly changed when oil production in the continental united states reached a peak. at that point the u.s. was forced to compete with foreign produced oil against its own trading partners in europe and japan. with less of their capacity in the system, the world oil supply became vulnerable to a single intervention or act of god like political unrest, high plains, highpoint sabotaged, and even severe weather conditions in the persian gulf which can lead to loading and shipping disruptions to oil tankers. the economic boom in asia and china over the past decade,

especially in the run up to the 2008 beijing olympic games saw oil prices skyrocket. between 2004-2005, the world's oil consumption rose an estimated 5 million barrels a day. according to dr. eby, asian economies accounted for 59% of the growth in demand for oil in 2004. now, when gerald ford was faced with a potentially catastrophic increase in oil prices in 1976, he turned to the saudis for help, as every other president has done since that time. on occasion, if their own national interests a line with those of the united states, the saudis would disregard the risk of the opec cartel. they will reach their production code and go pump enough crude into the system to try and floods and out with cheap oil. flooding the market is supposed to be the hold prices in place are forced to back down. a flooded oil market offers a

respite for western economies and takes the strain off badly stressed financial networks. so why don't we ask the saudis to flood the market now? if there are our allies, why don't they step up to the plate? they are allies in the sense but is no longer as simple as that. conditions have changed. in recent years real doubts have emerged in the minds of many analysts about the ability of the saudis to influence oil markets in the way they used to. we know that in 2008 the saudi did try to flood the market to help u.s. and its allies, but their effort to do so in the first half of the year did not take effect quickly enough. and effect by the time oil prices class in the second half of 2008 it was too late to save lehman brothers and is too late to take the strain off our financial networks. the damage inflicted on banks and big lenders was too great to

be reversed. another concern is the state of saudi oil reserves. in february of this of this year wikileaks revealed that a senior saudi oil company official had tipped off u.s. diplomats regarding the fact that the kingdom's reserves of crude oil may have been overstated by as much as 30 billion barrels a day, a billion barrels, i'm sorry, or by 40%. 40% of the reserves could be understated. he said the studies had overstated the reserves to encourage foreign investment. he might also have added that the saudis understand their oil reserves -- you take that away and what shared interest to the countries have? not much. for that reason and it's always been in the interests of the persian gulf oil producers, especially the saudis, to discourage any energy conservation in the united

states. this is done by making sure oil prices don't get so high that they encourage energy efficiency and the development of renewable energy products and resources that might make the u.s. more energy self-sufficient. the u.s. embassy cabled washington to say that quote, our mission now questions how much the saudis can influence the crude markets over the long term. clearly they can drive prices up if they want, but we question whether they any longer have the power to drive prices down for a prolonged period. then there's the surprising fact that saudi arabia is now the world's 15th largest consumer of primary energy. saudi arabia's population has soared in recent decades. and that in turn has placed great strain on the country's economy, and energy infrastructure. demand for electricity is growing by 10% a year, and saudi

arabia will have to double its electricity production in seven years. the saudis are moving forward with plans to produce their own nuclear power by 2020. in the future the saudis will have -- and finally the political turmoil in the middle east this year has led king abdullah to announce more than $150 billion in handouts and welfare subsidies to keep his people happy. let's not forget that $60 billion arms deal the obama administration concluded last year with the saudi a raving government, one of the biggest arms deal in history. the price of the welfare subsidies and u.s. weapons systems have to be paid for somehow. there can only be done by making sure oil prices stay at a level high enough to cover their costs. and you know what that means. you are going to pay for them. you are going to pay for king abdullah's welfare programs and you're going to pay for king

abdullah's warships. before the unrest in the middle east this year, the saudis calculated that the budgetary needs could be met if oil stayed at or above approximately $68 a barrel. but now according to wikileaks, on the expensive subsidies to pay for, saudi but you only be balanced if the price of oil is at least $88 this year, and $115 i 2015. so you can see the relationship here between arms sales, oil prices, political stability and financial insecurity i in the country such as this. i want to bring my remarks to a close by quoting from a recent article in britain's daily telegraph newspaper which warned my heart. under the headline grabbing banner without history we have own ignorance. [laughter] columnist jenny mccartney

noted that in britain today fewer and fewer school students are taking history as a subject. indeed she said they're being actively discouraged from taking a subject that is perceived to be too hard. history is the most inescapable of subjects she bought. we inherited, we make it, and we are paid to become part of the. and our education system, however, it studied is increasingly neglected. indeed, any large number of british schools, the end of history is already a reality. she goes on to say we cannot of history, but we ignore it. cicerone argued that remain ignorant of what occurred before you were born is to remain always a child. government policymakers, the private sector, the media and the public should remember that historians are here to help if called upon. they are important lessons to be drawn from the past, and

information historians gathered with the help of institutions, like this one, can be applied to the events of today's world. it might be helpful, for example, if president obama and his top policy makers were unaware that gerald ford actually grappled with challenges and 35 years ago this month, this country was facing a double dip recession, debt default, financial contagions, and political and social unrest in europe and the middle east. we are watching history play out in real time. our experiences may be new, but they are not as unique as we like to think they are. they certainly don't want another decade of magical thinking. thank you very much. [applause] >> for the q&a, there's a skinny microphone at the back of the

rubik if you can get to it, that's what we like you to ask the question that if you can't get to it, then call at the question and i will repeat it. spent thank you, enjoy the. what you think would happen politically in the middle east if for some reason they could stop buying oil from them, if they no longer have the resources, the revenue to subsidize their populations? what would be the effect locally in the middle east and then globally? >> we saw some of that this year. some of the governments have had to call back on the subsidies. i think when history of our times are written, that the arab spring will be connected to the financial collapse in 2007-2008. i think there's cause and effect. i think that governments that rule in that particular manner

need subsidies and their handouts to help legitimize their standing with her people. if they can't pay for them, then have a crisis of legitimacy. in iran right now president ahmadinejad somewhat to his credit understands that, and i think he tried to reduce the subsidies because he knows that there's a dangerous relationship there between them. so, it will be interesting to see how it plays out. >> in the middle 1960s when i was a senior here at the university i had a good friend from iran. he was a nuclear engineering students, and with the blessings of the united states government, the idea was that if iran could get electricity by nuclear means, that meant they had more oil they sell to us at a lower price. so couldn't you say the same thing that you said was driving saudi arabia to pursue a nuclear program, but also be the case in

iran? >> within iran's nuclear program? the iranians have a much bigger, 70 million people and a much more industrialized economy, and they, they don't have enough, i don't think they have enough oil and they can't generate enough oil revenue for the future needs. they would argue they need a nuclear power to keep the economy going, and i'm glad you brought up the nuclear program because this goes back to 1972. we know that president nixon and secretary kissinger pledged to the shot that they would sell nuclear power plants and nuclear fuel to iran, and in 1975 the u.s. agreed to sell iran eight nuclear power plants. and also offered to build a uranium enrichment facility inside iran for the iranians. this stuff is just coming out now, and it's very interesting part of the equation because in

order to really understand what's going on now we have two kind of the it any bigger picture, bigger picture, bigger concept. >> in the late '70s and early '80s, the u.s. began establishing military bases, central command in saudi arabia. i was wondering if you talk more specifically about the relationship between the oil, oil politics are there in the '70s to the establishment of central command? and also any secondary sources, history works or political theory works that were important to your research. >> okay. i figured ought to be in the back of the book which is quite extensive. everything is listed there. the question is, the shah was meant to be our gladiator in the gulf. he was meant to do that work so we didn't have to have bases.

and that's why the u.s. agreed to lift all restrictions on arms sales to the shah which created his own dynamic after a while. the change came during the arab oil embargo. king faisal ended up cutting a deal in the embargo with kissinger in which u.s. agreed to help the saudis deal with internal subversion at home and pacify surrounding areas. the terms of that deal are not widely known exactly what they agree to, promised to each other. but the oil supply was key to the. when the course pashtun and, of course, when the shah was ousted the u.s. was faced with this catastrophic loss of power within the persian gulf region. and again, concluded with military bases because the saudis were perceived as not being strong enough to stand up to a military iran.

>> do you think that some of the parallels you talk about our kind of changing today in a world where there's emerging oil markets in places that are more palatable to the u.s., such as brazil and canada the? >> it is changing. oil dependence has gone down. partly because of the economy. demand has gone down. its content when the economy comes back, the fear is that it will go up again because people have come we all have short memories. invest our policy makers keep putting policies in place to build on this current concern in the country over oil dependency. as far as canada and south america are concerned, i will believe it when i see. yes, canada is this country's biggest supplier of oil but shale is extremely expensive. the low-hanging fruit has been picked in terms of oil. we are now moving into a different and perhaps last phase

of the great oil age which is to drill under, tell him more difficult places. the shah predicted this in 1953. he was right off as a crackpot. he gave a famous interview in which he said in 100 years from now the oil business will be over. you will have to drill under the north pole. unit, he spoke about solar power, wind power. in fact, he was a visionary on that. >> thank you for your remarks. i'm a bit confused of the lessons of history here, because the fact is we have an ecological crisis for the use of oil. people have defined the paradigm in different ways. one way is to simply get more oil there and as you pointed out, the new oil is more expensive and it does have ecological costs to the earth.

the history of dependency on oil to this country is tied into great powerful interest in the automobile industry, in the oil lobby and oil and osha complex. robert engler in his book, outlined that in the early '60s. that's part of the sustained history. president of the united states have largely accommodated these interests, and there are certain military interests that you point out are part of the questions. so my question is, you know, how can we respond to this? obama at least rhetorically has talked about expanding mass zahedi, high-speed rail, alternative energy. and it seems for different reasons that are think are largely ideological. we don't have the resources to act proactively. so, how, given these different structural forces you think we face intervention? what the gerald ford do about these? >> gerald ford had a problem

because he had a short term in the white house. he was dealing with multiple crises. he turned to the saudis. as i said, the saudis right now are pumping more oil than they have in the past 30 years. i think there's probably been a series discussion with his of ministration about the need to help out the europeans in particular. history is repeating itself because policymakers often are working in secrecy. they are often working in very quickly and having to make decisions quickly. they are not able, or they don't have that analysis. or if they do, they are choosing to disregard it. so it's really, it will have to come from a combination of public pressure, public awareness. that means media interest. that's very difficult these days. or else as oil production plateaus and oil prices rise to

150, $200 a barrel, it's possible the market will take care of it. we will see these investors in we know energy. people will not be able, this country will not be able to divide another oil shock up to $200 a barrel. and. >> if you could touch on the role of speculation and speculators on oil, as well as if, we knew all of this was occurring in 73. why wasn't there a move towards some form of mass zahedi? >> well, there was. this was a very concept of francisco bay area, rapid zahedi comes in. this is a very interesting day. the late '70s, because, in fact, people began buying smaller cars. they were great strides made

towards energy conservation. forwarded talked about energy conservation. ford and carter both tried to work on this subject. and carter in particular talked about the need to free ourselves of dependence on this single commodity. but his message was not received very well. and he was -- every president since then has been haunted by the fate jimmy carter talked about oil and energy, self-sufficiency. he again was like the show. is probably a head of his time in the public was not ready to hear that. certainly he got beat up in the media. he gave the famous speech that some of you will recall called the malaise speech. i don't think the word malaise is in that speech. that's the way it was spun afterwards. and actually when he gave that speech, opinion polls, shot up. initially they went right through the roof.

and then they fell. there wasn't much follow-through. in terms of speculation i know there's been ongoing investigations about the role of speculators in 2007-2008 oil price spike. we just don't know the extent to which that affects the market, because right now the market is affected by so many different variables. and another variable is the fact that the saudis and the iranians use oil as a weapon. something i argued in the introduction of my book, that we see it as a commodity but for the saudis this is a weapon of national defense and on certain situations, offense, too. as they can flood the markets they're not just trying to help us, they are taking a financial hit but it's worth it to take a financial hit if they can cause some damage with the iranian economy. engine of this year a senior saudi prince, grants turkey was the former head of the secure

reserves in saudi arabia gave a speech in britain an amazingly the speech was leaked and he said that the saucepot, the vulnerable area for iran, iranian regime is to squeeze the economy. the way to do that is to deprive it of oil revenues. and. >> hello. i have a question for you on a recent event in libya. only 2% of oil comes from libya. plus what you think about events and unrest in europe as well spent i think they probably are connected because couches have some specifics to 85% living oil experts go -- exports go to your. most of us exports go to countries like italy, greece and spain.

so, for greece which is in a terrible situation even today as we know on the news, for them to suddenly, suddenly, oil was cut off during the fighting and then suddenly lives that 15% of their fuel supplies, is particularly problematic from a financial point of view. from a strategic point of view. they have got to be discussions going on now with all the governments anxious to get oil flowing in southern europe again, to make sure that there's enough, because the demand is made. so you don't see another spike in oil prices. so i think they are, i think that is directly related. and i would, was intrigued to do just two weeks ago before left new zealand, the british press was reported the first oil deal had been struck between british companies that are associate with the british prime

ministers, cameron's administration, and the libyan rebels. the libyan rebels need money pretty quickly because now they have to build the country of and repair the war damage. but you see this interesting dynamic at play again, and nothing at least to me, things happen in total isolation. >> andrew, thank you very much. i enjoyed your talk. the blurb for your book promises some insight with regard to the effect of the saudi flooding on the islamic revolution in iran. and you didn't quite get around to very much of that this eating. so i want to hear that story. [laughter] >> yes. it's a major part of the final part of the book. when the saudis agreed to flood the market in 1977, they cut a deal with the ford

administration to essentially break opec from the inside. they were very concerned, the shot at the time was the dominant power player within opec. and although he was a u.s. ally, as i said, he was resisting u.s. appeals concerning oil prices. so as it was described to me by the man who dealt with this crisis at the time, and within the administration, the u.s., the goal of the administration was to break opec without hurting the shah. they were unaware even at that stage, early stage that the shah's regime was not as strong as it appeared to be in public. so they made a miscalculation. they underestimated the severity of the financial problems facing the shah. he needed those oil revenues. he needed the money from the oil price increase that was going to come in 1977. when the market was flooded, iran was driven out of the

market. the saudis not only pump more oil, they sold the oil at a significant discount. so the diaries of the shah and the minister, ardeshir zahedi, the shah says we are broke. he had dug himself into a fiscal hole of his own and he really needed that money so that iran could pay its foreign creditors, and also he had its own welfare subsidies to worry about. the iranian people are getting arrested and it promised that he would, more housing et cetera -- more housing subsidies, et cetera said. he said they couldn't pay them. iran's oil revenues collapse something like 35, 36%. they were covered -- recovered slowly and then by that time it was too late.

the saudi flooded taken effect. it was taking effect. and the shah, well documented that the iranian economy suffered severely from this. the shah's government was forced to institute an austerity budget, and that led to job layoffs in iran. many of the people who were laid off were laborers, young men from the rural areas who were more conservative, more religiously inclined. they were working on construction projects around big cities like tehran. suddenly there on the streets unemployed. and they are the kindling for the revolution to come. so this is where policy makers who are working on an issue over here and doing their best, there are causes and consequences of what they're doing over here. and it's very difficult i think the policy makers have their eye on the ball over time. but we do know now that

secretary kissinger probably should have spoken up and said more to his colleagues and the administration because he was the one who really understood that the shah's regime was not a strong as it appeared to be. that was a long answer. >> a great lecture. how would you envision a world without opec? how would the united states benefit without an opec existence? >> well, opec is, opec is really saudi arabia. in june there was a split with opec, another split. once again, the saudis wanted to increase their oil production. the iranians and the rest of the, the majority of the cartel said no. can be broken up and the saudi said we're going to pump oil into the market anyway. so at the moment we have seen some ways a repeat since 1977. it will be interesting to see how far they go with it.

you know, russia is now a major oil producer. someone just indicated indicated we are seeing countries in south america discovering new oil deposits. opec is to the extent with saudi arabia wants to be. in the interest of the saudis are usually swing power. so that their power is the most important force in the oil markets in the world. >> i guess in the interest of full the closure, i must say that i am an iranian american. i've been here 52 years. the last four years as a lawyer -- as a loyal citizen. there is a lot of resentment in this country because of our dependence on the middle east oil. and this is even before 9/11 and the terror and all the problems.

we also resent the fact that the price keeps going up and we are paying a lot for it. i've watched on the discovery channel that concluded of the amount that we pay at the pump, let's say $3.40 or what have you, only 1 dollar of it does not go to taxes. all the rest is consumed by taxes of one kind or the other. which we impose and we collect, and it is a significant part of our economy. it's a significant part of our revenue. that last dollar pays the middle east, the transportation of crude oil, refining it, storing it, and distribution of its. i think most people don't know that.

now, in your research did you come across anything like that? do you think this is something people should prophesies alee? >> in the mid '70s it was different. the oil companies at that time were in fact concerned by oil prices getting too high, because it was dampening county man. so that was hurting their profits. there was a moment where they meet with secretary kissinger in early 1974 and they say to them, the shah is the problem. the shah is the one who's raising the price of oil, and please go and talk to them because. >> your talk about taxation of oil. >> i'm not familiar with that issue. >> was at the last question? one more? okay.

>> so, sometimes releases my understanding we observe shifts in the crude oil prices and not necessarily direct correlation between pump prices. how much of the actual cost to the consumer has to do with the value chain in america versus the true commodity crude price? or example refineries capacity, dissertation and -- >> i cannot answer that question. i honestly don't know. >> thank you. >> i can answer anything about the history, but that's a tactical question. [laughter] [applause] >> every week in booktv offers 48 hours of programming focus on nonfiction authors