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next on booktv 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 iraq. this is about one hour. >> good evening and welcome to the gerald r. ford presidential library. i'm senior classification archivist. we are very pleased to have you here this evening. at the privilege of introducing our speaker, andrew scott cooper, author of "the oil kings" how the u.s. and saudi arabia changed the balance of power in the middle east. andrew 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 also has advanced degrees in journalism and strategic studies and has worked as a human rights investigator and college administrator. and "the oil kings," his first book, andrew examines american

iranian and saudi oil policies from 1969 through 1977. during this crucial eight year period, america went from being the world's largest 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 oil kings stands the shah of iran who gambled his country's 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 formerly classified materials as he opens the window on this important period in history. in the process he has also produced the most thorough account yet of it president ford's handling of relations with the shah, king faisal and oil policy. pleased join me in welcoming

andrew scott cooper. [applause] >> thank you and thank you to the gerald all of -- gerald r. ford library for hosting me and making my research and this wonderful event possible. you may have heard the expression, it's good to be king. will tonight it's good to be a historian with an interest in oil diplomacy and -- this morning in "the new york times" published an op-ed on foreign oil dependency and "the wall street journal" published one on the importance of history studies in creating a dynamic workforce. this seeks to bridge to compelling and vital areas of public interest. it's a rare and wonderful thing for a historian to watch as

events that were only speculated about a generation ago have 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 financial thriller. there was talk of a sudden increase in oil prices triggering a global financial crisis. the bankers ups -- bankruptcy of countries in southern europe and a double-dip recession in the united states, 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 were near insolvency of countries in southern europe, bank failures and bailouts at home and abroad, united states economy on the brink of a double-dip recession,

unemployment over 9%. the warning to future generations is more relevant today than ever before. those he cannot remember the past 10 to repeated and we are simply repeating it today. parallels between the earlier period, that is the focus my research, and their own time, what brought home to me me most vividly during my recent stay in greece where i wrote "the oil kings," in may 2010, the day after lila protests in athens against the government austerity package, i walked to the center of town has burned out buildings and vehicles trying to comprehend what had obviously gone so badly wrong for the greek people. it seemed incomprehensible at the same country that had hosted the summer olympic games could have bankrupted themselves in the 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 wondered why the crisis had spiraled so far beyond the control of any single statesman or international agency. why were our biggest banks so vulnerable to events 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 looked at it, the picture resembled an institutional crisis and structural breakdown. then there was a question of leadership. unlike most analysts, was in thinking about how the current leaders in power in washington, paris or london were reacting to events. i was thinking about another president in another time. i was thinking about gerald ford. in particular i was thinking about a conversation resident ford had 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 that represents oil producers, from approving another big increase in the price of oil. at that time the shah was this country's most important middle eastern ally, so much so that the shah was known by it miring 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 show had made it clear to ford that he believed oil was undervalued in the price and that western consumers could afford to pay 15% more for their imports of urging golf crude oil. he had already brushed aside later from ford asking him to

rethink his position. the president meeting with the shah of ambassador was a final attempt to make the iranians see the reason. that is why i ask you to come in quietly ford said. i want no confrontation and that is why this meeting is private. in the meeting the president was joined by allen greenspan, who at that time served as chairman for the council of economic advisers. and also by national security adviser brent scowcroft he took notes. together, ford and greenspan tried to convey what they feared might happen, 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 put millions of people out of work and caused big corporations

like pan am to appeal to the federal government for a bailout money. in europe at that time, soaring fuel costs have helped drive or shekels economy to the wall and weaken the economies of spain, greece, italy and great britain to 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 exhausted these countries 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, bank of america, citi, jason morgan had rushed to fill the gap to the point that they were now dangerously overextended and vulnerable to to a single default somewhere along the line. in a rare moment of candor at that time morgan's president

publicly admitted quote, and a gritty drive for profits american banks in the early 1970s made bad loans and real estate investments and further questionable purposes. wall street was now anxiously awaiting the outcome of the opec meeting that was due in a few days time after ford's meeting with the heady because everyone understood that another big increase in oil prices might either trigger for default contagion and collapse. now to further complicate matters for president ford at this time, countries had recently thrown off the shackles of years of authoritarian rule. they were trying to transition to western-style democracy. this is portugal, spain and greece while bird with underperforming economies, soaring levels of inflation and unemployment and political

unrest from right-wing and left-wing extremist. afforded administration was particularly worried about for nato allies, italy, spain, portugal and great britain. italy's communist party was exploiting economic discontent to try to maneuver toy 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 prime minister callahan, he would have to implement an austerity program so harsh there would be writes in the streets of london. the governments of spain and portugal were effectively broke and in danger of being ousted by extremist. said president ford to the ambassador, the situation in several countries is very serious. any increase in oil prices adds to the danger of a financial crisis to failure in governments, even to the danger of a military crisis.

of course this is in the context of the cold war. how did things get so bad that in december of 1976 president of the united states had to appeal to the ambassador of a developing country to help save the 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 in the first half of 1976 to pull itself out of the recession and to lift the economies with its allies in its wake but something happened on the road to economic recovery. 18 months earlier the ford administration had disagreed over the size of federal stimulus spending package. the result was a stimulus that satisfied no one -- satisfied no one. liberals complained that more not less was needed. in the event, billions of dollars set aside for federal stimulus programs went unspent. in fact federal government spent

an extra made it $15 billion which was a huge dollar amount at the time. from i did some analysts of a previous budgetary miscalculation from 1976 when lyndon johnson's administration underestimated the cost of the vietnam war by $10 billion caused a blowout in the federal budget with inflation -- inflationary results. 11 years later, complained one observer, the federal budget was in a state of chaos. the shortfall in stimulus spending helped create a condition in which they use is a common set of taking office projected by greenspan and administration plateaued and caused and appeared headed for a nosedive in the form of a double-dip recession in the end of 1976 since 1977. now then in turn made u.s. imports of goods from europe would tail off and that would place further pressure on already struggling european

economies. the second half of 1976 was dubbed the greenspan cause. he gave it that name. allen greenspan was forced to admit that 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 growing at all. it had paused. it was greenspan who warned the president that the economy was so fragile that even a 15% increase in in the price of oil might be enough to tip the u.s. economy and the economies of its trading partners back into recession with the risk of government failures and tank collapses. in the oval office that day, greenspan explained to the iranian ambassadors and hedy that oil prices have caused so much chaos in the international financial system that the lending flexibility of big banks had vanished and financial networks around the world were stretched thin. he added that the huge increase in debt taken on after 1973 with

oil consumers had 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 to the shah of iran share restraint on oil prices. when i first read that transcript more than four years ago now and a full year and a half-baked before leningrad collapsed i was frankly -- though in fact i could not place the conversation within a coherent framework because of what i was reading was right in late 1976 the present 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 15% increase in the price of oil could cause panic and bring down the banks and threaten the stability of 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'd never heard of the banking scare in 1976 before and certainly have not expected to find one. there is no reference to the episode in the memoirs of them are administration officials that i am aware of. and histories from that period apparently make no reference to it, again that i am aware of. so to try to put the context of the transcript, to 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 1970s. i started to look at the whole subject of oil and much more holistic way. by studying the impact of rising oil prices in the 1970s on the economies of countries like the united states, portugal, greece italy and spain but also economies of countries like south vietnam, tanzania, sri

lanka, canada and chile, taking the ford had a conversation as my starting point and moved my 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 for his confrontation with the shah on 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 oil embargo or, the yom kippur war, past vietnam war, the 1972 presidential election and indeed back as far as the shah of iran's visit to washington to attend the funeral of former president eisenhower in 1999. that is the board 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, the 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 newer more ominous one than the last time in this and this crisis is still moving and faces now, i began to wonder if i was watching gerald ford's worst-case scenario from 1976 starting to play itself out. until that time it hadn't occurred to me that modern nationstates could go bankrupt. individuals can be declared bankrupt, but entire countries? i mean it seemed unfathomable. but there we were and there they were lined up in a row of dominos 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 ford had spoken about in his meeting with sir hedy the social

unrest began. there were riots in disturbances in athens and london. governments were ousted in iceland ireland and portugal and britain. i remember thinking perhaps i can offer insight that i was in new zealand at the bottom of the world, recovering from spinal surgery. i thought what can you do? dialed 911 to report a historical emergency? [laughter] and no one is going to listen to me. this raises a big question about the role historians can play in our fast-moving contemporary society with a fixation on the now and the superficial. during my research for the subwhen i interviewed a highly respected washington-based military strategist. i asked him to help explain to me how the united states became so weak in the 1970s in this crucial period when gerald ford as president he inherits the situation has to manage it.

is in my conversation with this individual veered onto other subjects and inevitably we begun to the middle east in the u.s. invasion of iraq in 2003 and i asked him, what did he think i've gone wrong and where did he think it had all gone wrong? now he explained to me that usually when there's a foreign-policy crisis in washington, defenestration 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 them not to questions -- to decide the best way to respond to the issue that they are trying to deal with. however that apparently did not happen in the run-up to the invasion of iran in 2003. a story and were not invited to share their views because the administration and office had already decided on a course of action regardless of facts.

that changed however in the summer of 2003 when u.s. troops were attacked and the united nations compound in baghdad was one. suddenly the experts received invitations, we need to talk to you. in other words, the experts weren't called in until the disaster had already started to unfold and by that time it was too late. this individual told me he attended a meeting in which the participants were shocked at the ignorance that the officials were briefing them. they knew next to nothing about iraq make up for the territorial divisions within the country. and i told them i hadn't regarded them as particularly relevant. when we want something to happen so badly that we ignore all evidence to the contrary we call it magical thinking. and the kind of magical thinking on display in iraq can be seen today in the way we relate to

oil and i'm not referring merely to the country's reliance on foreign supplies of oil, but the commodity itself, which would have allowed to dominate our lives and determine our destiny's. if it's not obvious now, should be. it's no coincidence that the american century coincided with the age of oil, which many experts believe is winding down. the age of oil i am talking about. from the end of world war ii in the mid--- until the mid-1970s low oil prices made possible they economic miracle that saw the united states enjoy several decades of 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 allen greenspan and addressed to nelson rockefeller, president

ford's vice president of the time. dated january 7, 1975, greenspan's memo was a well-intentioned but remarkably naïve appeal to politicians in washington to engage in straight talk with the american people. in it he explained that rising oil prices had altered the national economy and there would be no going back to the 1960s when in his words, the base of our society and the base of our economy was secure. he continued, now the real world has begun to press on the average 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 this addiction to oil. the immediate problem with oil, although i would list their national defense posture in fiscal erosion as equally critical he said, it is

important for the american people to understand how the oil crisis emerged, what it is, and what our potential consequences will be if we do not come to grips with it. that was in 1975. 36 years later, that is a conversation still being had with the american people. statistics can become mindnumbing after a while but the reality is that this country consumes more oil than any other, 22% of the world's oil production in a year. let's go back to 2005 and the latest phase of the oil pricing rollercoaster that we have all been on in recent years. at that time, oil prices from 2005 to 2008, oil prices double. oil that was selling for $75 a barrel in the summer of 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 but it wasn't talked about the time. noel mentioned the phrase oil shock. oil prices, oil price increases can be absorbed by consumer economies if they are gradual and moderate. slow increases in the price of oil about governments, businesses and consumers to adjust their spending patterns of behavior but sudden spikes in the price of oil caused real structural damage. like dr. nouri al roubini of -- and professor hamilton of the university of california in san diego and is a result of my research into the nixon and ford eras, i too believe that soaring oil prices played an important part in the overloading u.s. economy in 2007 and severely destabilizing financial networks it wasn't the sole cause and it may not been the biggest cause but you can't ignore that as was

one cause of this current financial crisis we are all stuck in. oil prices were and continue to be one of the top contributing factors to this crisis and the intensity and duration of this crisis. the parallels with the oil shocks of the mid-1970s are unmistakable and i would argue they were closer in it now says. professor hamilton has drawn a link between the 2007 mortgage foreclosure crisis and high oil prices. in testimony before the joint economic committee of the congress, he described how 4-dollar a gallon gas prices in 2007 led to a sudden change in consumer spending patterns and that these changes disrupted key economic factors. he gave the example of the automobile and auto parts that shave half a percentage off of gdp between 2007 and 2008. americans he said on average

bought 140 billion gallons gasoline a year. so if oil goes up 1 dollar price, that means a loss of $140 billion in consumer purchasing power. as oil prices rocketed to record highs at that time, incomes fell and jobs were lost as the economy slowed down. intriguingly, professor hamilton told congress that quote, we saw the biggest initial declines in house prices and increases in delinquents ease in areas furthest from the urban core, suggesting an interaction between housing demand and commuting costs. one's house prices declined and deficiencies reached a certain level keys institutions came to be doubted. he concluded his testimony with his this 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 of 2008.

the point he is making is that the days when this country or any single country could influence or manipulate the world's oil supplies are over. the entry of china into the global energy market in 2000 led to the same tightening of market conditions that we saw when the gibney into the royal -- oil market as a consumer in the early 1970s. it may seem hard to believe, but as late -- as recently as 1970 the united states was the world's biggest oil producer. now that quickly changed when oil production in the continent with the 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 capacity in the system, the world oil supply became vulnerable to a single intervention like political unrest, pipeline sabotage and even severe weather conditions in the persian gulf which can

lead to bloating and shipping disruptions of 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 and 2005, the world's oil consumption rose an estimated 5 million barrels a day. according to dr. roubini, asian economies accounted for 59% of the gross 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 saudi's for help, as every other president has done since that time. on occasion, with their own national interest aligned with those of the united states, the saudi's will disregard the risk of the opec cartel. they will preach their production quota and they will pump enough surplus crude into the system to try and flood the

market with cheap oil. flooding the market is supposed to pull prices in place or force them back down. a flooded oil market offers a spike for economies and takes the strain off badly overloaded financial networks. so you may ask, why don't we ask the saudi's to flood the market now? but if they are our allies when they step up to the plate? they are our allies in a sense but it is not 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 saudi's to influence the oil markets in the way they used to. we know that in 2008, the saudi's do try to flood the market to help the u.s. and its allies is in their effort to do so in the first half of the year did not take effect quickly enough. in fact by the time oil prices collapsed in the second half of 2008, it was too late to save

lehman brothers into late to take the strain off of our financial networks. the damage inflicted on banks was too great to be reversed. another concern is the state of saudi oil reserves. now in february of this year wikileaks revealed that these senior saudi oil company officials had tipped off u.s. diplomats in riyadh to the fact that the kingdom's reserves of crude oil may have an 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 overstated. he said that the saudi's overstated their reserve to encourage foreign investment. he might also have added that the saudi's understand their oil reserves are the asset that guarantees u.s. protection and reliance on saudi power. if you take that away, which shares interest to the two countries have? not much.

that reason has always been the interest of the persian gulf oil producers, especially the saudi's, to discourage energy conservation in the united states and 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 in riyadh tabled washington to say that quote, our mission now questions how much the saudi scanned substantive way influence the crude markets over the long-term. clearly they can drive prices up if they want to, but we question whether they any longer have the power to drive prices down for a prolonged period not. then there's the a 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 its 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 saudi's are moving forward with plans to produce their own nuclear power by 2020. in the future the saudi's will have less oil to export. and finally, the political turmoil in the middle east this year has led king abdulah to announce more than $150 billion in handouts and welfare subsidies to keep its people happy. let's not forget the 60 billion-dollar arms deal the obama administration concluded last year with the saudi arabia government, one of the biggest in history. the price of the welfare subsidies and new u.s. weapon systems have to be paid for somehow. that can only be done by making sure oil prices stay at a level

high enough to counter their cost. and you know what that means, you are going to pay for them. you are going to pay for king abdulah's welfare programs and pay for king abdulah's warships. before the unrest in the middle east this year, the saudi's calculated that their budgetary needs could be made if the oil stayed at or above approximately $68 a barrel. now according to estimates, with all the new expenses, subsidies and weapons to pay for come the saudi budget will only be balanced at a price of oil of $88 this year and $115 by 2015. so you can see the relationship here between arms sales, oil prices, political stability and financial insecurity in a 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 warmed my heart. under the headline, grabbing

banner without history we have a -- columnist at jenny mccartney noted that in britain today, fewer and fewer school students are taking history as a subject. in digi said they are being actively discouraged from taking the subject that is perceived to be too hard. history is the most inescapable of subjects broke mccarthy. we inherit it, we make it and we are slated to become part of it. in our education system however, its study is increasingly neglected. indeed in a large number of british schools, the end of history is already a reality. she goes onto say, we cannot allude history but we ignore it at our peril. cicero argued that to remain ignorant of the truth before you're born 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. their important lessons to be drawn from the past and the information historians gather with the help of institutions like this one can be applied to the event of today's world. it might be helpful for example if president obama and his top policymakers were aware that gerald ford actually grappled with similar sorts of challenges and a 35 years ago this month, this country was faced with a double-dip recession, debt defaults, financial contagion in political and social unrest in europe and the middle east. we are watching history play out in real time. experiences may be new but they are not as unique as we like to think they are. they certainly don't warrant another decade of magical thinking. thank you very much. [applause]

for the q&a, there is a standing microphone at the back of the room and if you can get to it, that is where we would like you to ask her questions. if you can't get to it, then call out the question i will repeat it for the viewing audience. >> thank you. i enjoy that. what you think would happen politically in the middle east if for some reason we would stop buying oil from them, they no longer have the resources or the revenue to subsidize their populations? what would be the effect globally in the middle east and globally? >> we saw some of that this year. some of the governments have had to pull back on their subsidies. i think when the history of -- are written that the arab spring will be connected to the financial collapse of 2,002,008.

i think there is cause and effect there. i think governments that rule and that particular manner need subsidies and handouts to help legitimize their standing with the people and if they can't pay for them, then they have a crisis of legitimacy and in iran right now president ahmadinejad somewhat to his credit understands that he is actually trying to reduce the subsidies in iran because he knows that there is a dangerous relationship there between them. so it will be interesting to see how it plays out. >> hi. in the middle 1960s when i was a senior here at the university, i had a good run from iran. he was in nuclear engineering student and with the blessings of the united states governmentunited states government, the idea was that if iran could get electricity by nuclear means, it meant they had more oil to sell to us at a lower price.

so couldn't he say the same thing that you said was driving saudi arabia to pursue a nuclear program would also be the case in iran? >> within iran's nuclear program? the iranians have a much bigger -- 70 billion people on it much more industrialized economy. they don't have enough oil. i don't think they have enough oil and they can't generate enough oil revenues for their future needs so they would argue that they need the nuclear power to keep their economy going and i'm glad you pointed out the nuclear program because this goes back to 1972. we know that president nixon and secretary kissinger pledged to the shock that they would sell nuclear power plants and nuclear fuel to iran and in 1975, the u.s. agreed to sell iran a nuclear power plants and also offered to build an iranian

enrichment facility inside iran for the iranians. this stuff is just coming out now and it's a very interesting bart of the equation because in order to really understand what is going on now we have to kind of put it in a bigger picture, put it in context. >> hi. in the late 70s and early '80s, the u.s. began establishing military bases in central command in saudi arabia and amman and bahrain in such and i was wondering if you could talk more specifically at about the relationship between the oil, the oil politics earlier in the 70s to the establishment of the central command that also any secondary sources, history works for political theory works that were important to your research? >> okay. at the bibliography 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 is why the u.s. agreed to lift our surgeons on arms sales to the shah which created its own destructive dynamic after a while. the change came when during the arab oil embargo king faisal and at that cutting a deal to end the embargo with kissinger was was -- which the u.s. agreed to help the saudi's deal with internal subversion at home and external subversion and pacified surrounding areas. the terms of that deal are not widely known, exactly what they agreed to promise to each other but the oil supply was part of that and then of course when the shah was ousted, the u.s. is faced with a catastrophic loss of its power within the persian gulf region and began including

military bases because the saudi's were perceived as not being strong enough to stand up to a militant iran. >> you think that some of the parallels to talk about our kind of changing today in a world where there is emerging oil markets in places that are more palatable to the u.s. public such as brazil and canada? >> yeah. all of the things partly because of the economy, oil used to shift down in the market has gone down so it's gone down and when the economy comes back the fear is that they will go up again. we have short memories. you know, as far as canada and south america are concerned, i will believe it when i see it. candidates canada is the country's biggest of product --

supplier of oil but shale is extremely expensive. the low-hanging fruit has been picked in terms of oil and we are now moving into a different and perhaps last phase of the great oil age which is drill under the arctic and drill and more difficult places in in the shop predicted this in 1973. he was written off as a crack.. he gave the famous oriana silagy in which he said in 100 years from now this oil business will be over and you will have to drill under the north pole. he spoke about solar power and wind power and in fact he was a visionary on that. >> thank you for your remarks. an event on the lessons of history here because the fact is we have an ecological crisis with the use of oil. people have defined the paradigm of energy security in different

ways. one ways to simply get more oil and as you were pointing out the new oil is more expensive than it does have ecological -- the dependency of oil is certainly a powerful interest in the auto industry, and the oil lobby, oil industrial complex. robert engler in his book outliers in the early 60s and that is part of the history. the present of the united states has largely accommodated these interest in their certain military interest that you point out in a sophisticated fashion that are part of the equation so my question is, how can we respond to this because now obama at least rhetorically has talked about expanding mass transit, high-speed rail, alternative energy and it seems for different reasons that i think are largely ideological, we only have the resources to act proactively. so given these different

structural forces do you think the -- of innovation and what to gerald ford do about these structures? the gerald ford had problems and he had a short-term and the white house and he was dealing with multiple crises. he came to the saudi's and they flooded the market in 1977 and as i said the saudi's right now are pumping more oil than they have in the past 30 years. i think that this -- there is probably been a series of discussions with this administration about the need to help out the europeans in particular. history is repeating itself because policymakers often are working in secrecy and often are working very quickly and having to make decisions quickly and they are not able or they don't have the analysis at their hands or if they do, they are choosing to disregard it. so, it will have to come from a combination of public pressure,

public awareness, that means media interest and it's very difficult these days, or else as oil production plateaus and oil prices rise, to 150 or $200 a barrel as possible the market will take care of it and we will have, we will see the investments in renewable energy because people will not be able to, this country will not be able to survive oil, another oil shock of up to $200 a barrel. >> if you could touch on the world of speculation and speculators, oil as well as if they knew all of this was occurring and 73, why wasn't there a move towards some form of mass transit? >> this is the period when san francisco's bay area transit comes than.

this is a very interesting period in the 70s and the late 70s because in fact people began buying smaller cars. there were great strides made towards energy conservation. for talked about energy conservation. ford and carter both try to work on the subject and carter in particular talked about the need to free ourselves of dependence on the single commodity but you know his message was not received very well. every president since then has been haunted by the fact that jimmy carter, talking about oil and energy, self-sufficiency. he again like the shah was ahead of his time and probably not ready to hear that. certainly he got beat up in the media are going to give the famous speech that some of you will recall called the malaise speech. i don't think the word malaise is in that speech. is the way it was fun and

actually when he gave that speech his opinion polls shot up. initially, they went right through the roof. and then they fell when there wasn't much follow-through. in terms of speculation though there've been ongoing investigations about the role of speculators in 2007 and 2008 oil price spikes. we just don't know the extent to which -- because right now the market is affected by so many different variables. you know and another variable is the fact that the saudi's and the iranians see oil as a weapon. which is something i argue in the interjection of my book, that we see it as a commodity but for the saudi's national defense and uncertain situations, offense too. if they can flood the market they are not just tried to help us, they are taking a financial hit but it's worth it to them to

take up on it's a hit if they can cause damage with the iranian economy and in june of this year a senior saudi, prince of turkey was formerly the head of the security service in saudi arabia, gave a speech in britain and amazingly the speech was leaked to british newspapers. he said the vulnerable area for the eighth inning regime is to squeeze its economy and the way to do that is to deprive it of its oil revenues. >> i had have a question for you on a recent event in libya. i made that continues. i understand 2% of the oil comes from libya to the u.s. but there is a big play in the european market. plus what you think about the events and unrest in europe as well? >> i should say probably they are connected because i will give some statistics here.

85% of libyan oil is going to europe and most of those 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 them to send me -- oil was cut off during the fighting. 15% of the fuel supplies is particularly problematic from a financial point of view and a strategic point of view and they have got to be discussions going on now with all the government, anxious to get oil flowing into southern europe again to make sure that there is enough -- that the demand is met so you don't see another spike in oil prices. so i think they are, i think they are directly related and i was intrigued that just two weeks ago, before that in new

zealand, the british press was reporting that british oil deals have been struck between british companies that are associated with the bride -- british prime ministers, cameron to frustration sequestration and the libyan raul's. the libyan rebels need money pretty quickly to because they will have to build the country up and repair the war damage but you see this interesting dynamic at play again and nothing at least for me, very few things are totally, happen in total isolation. >> andrew thank you very much. enjoyed your talk. i'm on call. the blurb from your book promises some insight with regard to the effect of the saudi flooding and on the islamic revolution in iran and he didn't quite get around to very much of that this evening, so i want to hear that story. [laughter] >> yes comment this is a major part of the final part of the

book. when the saudi's agreed to flood the markets in 1977, they cut a deal with the ford administration to break -- essentially break opec from the inside and they were very concerned. the shop that time was in a power play, and the u.s. ally as a second 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 was in the administration, the u.s., the goal of the ministry should was to break opec without hurting the shop because they were aware 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 for sure. they underestimated the severity of the financial problems facing the shah.

he needed those oil regains. he needed the oil from that price increase at was going to come in 1977 when the market was flooded iran was driven out of the market. this out is not only pumped more oil into the market, they sold their oil at a significant discount to the price offered by the cartel including iran so the diaries of the shah are quite interesting because there is a moment in january of 1977 when the shah says we are broke. he had dug himself into a fiscal hole of his own and he really needed that money so iran could pay foreign creditors and also he had his own book fair subsidy to worry about. the iranian people were getting restless and he had promised that he would, more housing subsidy etc. sector and he could not contain them. and so in the first nine days of 1977 iraq oil -- iran's oil

regimes collapsed 35 or 36%. now they have recovered slowly over february and march but by that time the saudi flood had taken effect, was taking effect. and it's well-documented that the iranian economy suffered severely from this. the shah's government was forced to enforce their austerity budget that led to job layoffs and iran. many of the people who were laid off were laborers, young men from the rural areas who were more conservative bull religiously inclined. they were working on construction projects in the big cities like tehran and suddenly they were unemployed. they were the kindling for the revolution to come. so this is where policymakers who are working on an issue over here and doing their best, there

are causes and consequences of what they are doing over here. it's very difficult i think for policymakers to have their eyes on the ball all the time, but we do know now that secretary kissinger probably should have spoken up and said more to his colleagues than the administration because he was the one who really understood that the shah's regime was not as strong as it appeared to be. that was a long answer. >> a great lecture. how would you envision a world without opec and how would the jena benefit without it opec? >> well, opec, opec is really saudi arabia and in june there was a split, and others but which was quite interesting. once again the saudi's wanted to increase their oil production. the iranians and and and arrested, the majority, the

meeting broke up and the saudi said we don't want to pump oil into the market anyway so at the moment we are seeing in some ways a repeat of 1977. it will be interesting to see how far they go with it. do know rush is now a major oil producer as so someone just indicated. we see countries in south america at discovering discovering new oil deposits. i mean, opec is to the extent with saudi arabia wants it to be in the insures of the saudi's to use this power so that their power is the most important force in the oil markets in the world. >> i guess in the interest of full disclosure, i must say that i am an iranian immigrant. i've been here for 53 years. the last 40 years of it as a -- 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 that we have now. we also resent the fact that the price keeps going up and we are paying a lot for it. i watched a program on the discovery channel that concluded, of the amount that we pay at the pump, let's say $3.40 or whatever, only 1 dollar of it does not go to taxes. all the rest is consumed by taxes of one kind or another. it is a significant part of our economy. to significant part of our revenue. that last dollar pays the middle east, the transportation of crude oil, refining it, storing

it in the distribution of it. the thing -- i think most people don't know that. in your research did you come across anything like that? do you think this is something that people should hypothesize at least? >> in the mid-70s it was little different when we just had -- the oil companies at that time weren't that concerned bioof prices getting too high because it was dampening down the -- so that was draining their profits and a moment where they meet with secretary kissinger and early 1974 and they say to him, the shah is a problem. the shah is the one who is raising the price of oil and we need to go and talk to him because -- >> we are talking about taxation of oil. >> i'm not familiar with that.