confident that if there's not other mccondo disaster, we're going to see a very robust growth, more robust growth than the eia has. when we looked at onshore production, we interestingly ran a lot of regressions based on efficiency improvements and the surprising thing to us, which also gave us more robust numbers an the eia has but surprisingly we have understated the degree to which efficiency gains have been growing. we have i think down more significantly robust view of canadian production than the eia has, and that's partly based on new revisions from canadian producers and the canadian government, and we have an uptick actually in alaskan production, so i think the major differences are found in the deepwater and our judgments about efficiency improvements in

tapping new technology into a very robust resource base. >> so what i hear is essentially it's a series of microanalyses of different opportunities rather than different macro assumptions about the investment environment and so on. let me ask something about timing, because adam, when i said your scenario doesn't have a north american independence case by 2020, i picked 2020 on purpose. right, if i look at the charts you had up there, you got to that point by 2035, and ed, you have it happening sometime between 2015 and 2020. so maybe i'll ask you first, ed, you talked about the study you did of cycles a long time ago. what makes you confident that you can ramp up production at that pace without running into the sort of cost inflation and logistical constraints that might stop you in your tracks? >> this actually, there's some history that you can use on costs. you, if you take a one-year look

at costs, you see much more inflation in the last year than you would if you take a three-year moving average of costs. if you take a three-year moving average of costs basically upstream costs the way we look at them have come down, i know some people who look at them, see them going up. i don't like their methodology, and i'm happy to debate with the firms that do that, what their methodology is, but there are technological improvements that bring, that have been bringing costs down. you know, i think that's sort of the most important point. >> adam, you have a lot of different, you talked about a lot of different cases and there are downside cases as well, particularly if you have low global oil prices. can you talk about that? how big is that possibility? how big is the risk that ed's case or even your reference case gets undermined by low global oil prices, whether because

iraqi production, low global demand, because of economic weakness, how do you think about that? >> well to a certain extent i think you have to be a bit careful that the assumptions that you make about high production and don't come back and result in lower price argument. if there is tremendous success on the production side both in the oecd countries in north america and outside as well as improvements in places like iraq, libya and else where in the opec countries, it's very possible and technology improves and as ed is saying, costs come down, the net result could be lower oil prices rather than higher oil prices that could ultimately prove to be a

circular kind of argument. we've seen that happen before. it's not clear to the bulk of the an litily community that oil has to be 100 or 125 or $200 a barrel and the eia's high oil price case to get the supplies needed to meet demand, and we have seen occasions where oil prices have come down pretty sharply if, i think the market's ultimately will set the price and we'll have to see how strong the oil rig count remains both in the u.s. and globally, if prices continue to move south. so success on the production front and technology front could lead to lower prices, which ultimately would reduce the

incentive for production or further enhancements in technology. >> let's take that thread a little bit further. i know when people talk about the potential for prices to come down, the typical response is that opec will modulate production in order to keep prices relatively high. they have revenue -- the member countries have revenue needs and so on. ed, is there a point where those countries, there's so much volume coming from else where that those countries have to make a choice between how much they sell and the price they get, and that causes prices to come down and undermine north american production? >> yeah, i mean there's no doubt that a lot of what is unfolding has resulted from effectively an opec subsidy of drillers, and built into a model at least for a short period of time is the issue that you just raised, namely the fiscal requirements

of commodity-producing countries and it's not, by the way, just venezuela and iran. it's also russia, which has a higher break even number even than saudi arabia, which is much lower than those. so i think there are a whole bunch of trade-offs. some of it are trade-offs that are already developing, so this is, you don't have to wait for north american energy independence to see some of this unfolding. if you look at the rate of decline of imports into the u.s. gulf coast of africa and northwest europe, northwest europe in part because of declining production but west african crude had been selling at a premium to brent. we are importing less and less crude from west africa, by sometime in 2013 on current trends the gulf coast will import no crude from west africa in what used to be 2.5 million barrels a day of imports will be more or less order of magnitude 300,000 barrels a day all going

to east coast refineries, and this is already a challenge for angola and nigeria, among the opec producers. by the time a few years roll by and there are a couple of pipelines that bring canadian crude currently selling at $50 a barrel down to the u.s. gulf coast, it would probably mean that the u.s. needs to import no oil from venezuela, no oil from saudi arabia, no oil from iraq, and that also poses problems, because the quality of that crude specifically is attractive in u.s. gulf coast upgrading refineries and there aren't many outlets for that crude oil. there will be very specific plain inflicted on particular oil exporters, even without energy independence and even without a flood of oil coming out of the new production. >> adam, i don't want to misquote you but if i remember correctly, you've been cited

recently stating that depending on the development of north american oil production, you might for logistical reasons see attempts to export, perhaps to export light oil and heavier in order to take advantage of the refining capacity that exists here. if political barriers make that impossib impossible, how do you see that affecting the outlook and the potential for expansion of american and north american more broadly supplies? >> right. well it's always, i think, a good thing for me to state that eia tries to provide the best unbiased and non-partisan energy research for its customers, and we don't do policy and level of exports with energy products

including natural gas and oil is a policy that is being worked on by appropriate policy-making agencies. what eia can do i think is to try to bring some facts to it, i think ed was already alluding to the fact that we may see through bakhan oil production and eagle fjord in texas light sweets going into a refining system in the u.s. that was designed to upgrade heavier or higher sulfur crudes, particularly on the gulf coast. what that suggests is ultimately it might make some sense to try to look at this from the standpoint of what would be best from the overall national interest of the u.s., what would help from the standpoint of growth in the economy, jobs and so on, you know, managing whatever the environmental

issues are. i think that if you were to say we continue to see an increase in light sweet crude and if you made that assumption and assumed that some kind of export policy was not going to be allowed, the net effect would be to drive prices down for those crudes, lower prices for those krucrude would mean potentially that they would not be developed. you wouldn't have the rigs drilling. you wouldn't have people employed in doing it, and the benefit s that add to the econoy would be lost, so that would be the case. we have a ways to go before we're going to, you know, be faced with that, but it's certainly worth policymakers considering. >> would you reach a point where the price got pushed down enough that people invested in refining capacity suitable for this kind of oil?

>> it's hard to see a great deal of investment in the u.s., i think more likely what you would see is as is already occurring, shifts in the transportation system designed to move light sweet crudes in places like north dakota to the east coast, where the refineries are set up to, more of them are designed to handle lighter sweet crudes. that's going to require changes in infrastructure. we're already seeing some crude moving by railroad, more of that will occur. there is talk of extending pipelines to move the crude, in the direction of the refineries that could use it. >> before i go to questions, ed, i want to ask you one more thing. you've written that the one big potential barrier to the scenario that you lay out is opposition on environmental grounds. can you talk a bit about that? how do you see that potentially

unfolding and what exactly do you mean by opposition on environmental grounds? >> the american public has been split on a whole bunch of oil issues for a century, and those splits of perceptions of the national interests have not gone away. in many respects they have gotten exacerbated over time. people for who they perceive to be legitimate reasons don't like using dirty material or extending the usefulness of what are dirty things as part of what we do, and it comes in a couple of layers. there are people who don't like importing environmentally unsound or what are perceived to be environmentally unsound crude oil processed in environmentally unsound ways from canada. there are people who are opposed to exports, largely on the grounds that it perpetuates

environmental damage or questions the integrity of the environment, physically at the plant of refineries or in the plants of uses of hydrocarbons that have waste products that are either on the land or in the air, so i think it's clear that we have a very robust set of environmental interests in this country who don't like extending the life of hydrocarbons. >> you talk about a variety of different sources. you're talking about offshore. you're talking about tight oil. you talk about canadian oil sands. is that all of that something you put in the question mark category based on public environmental concerns or is some of it more uncertain than others? >> i think there is uncertainty, and then we have not had a decent public debate on these issues, either at the head of state level or on the hill.

i think it's been fortunate for the development of this industry that so much of the resource base comes from private hands or private land or state lands rather than federal lands. so and that's been good in terms of development, it has stifled the debate on one hand. on the other hand, specifically if you look at fracking, there are issues related to theed aquasy of acwhichevers, issues related to the integrity of arquifers. i don't know whether i'm a reasonable person or not. what i am concerned with among these it not acquifers can have their integrity maintained through decent cementing practices. i think the aboveground waste disposal is a particularly

difficult issue. i think at noithe annoyance of truckers who let's face it, have a higher incidence of drug use and alcohol use than most other elements of the population is something that is of concern, should be of concern, and has an impact on waste disposal, underground injection of hydro fracking fluids has been associated with unusual seismic activity in places like the midlands and the united kingdom, or youngstown, ohio, fayetteville, arckansas and tha also strikes me as a legitimate concern. i think it's fair to say most concerns can be dealt with at a higher cost and the question is what is that higher cost and how does the industry bear it. >> i had a very interesting conversation a couple weeks ago with the mayor of youngstown who is both pro development and had his house significantly damaged by one of these earthquakes. let's take a couple questions

from the audience. please put your hand up and i will point. i believe there's a gentleman with a microphone who will bring it to you. over here, along the aisle. >> yes i was wondering if you could tell us how long it would take for the brazilian pre-salt production to come online and what impact that will have. >> i'm happy to address the issue. some of it is an obstacle that should not exist. some of it is an obstacle that potentially should exist. in terms of the costs, you know, one of the great changes of the last decade and a half has been the growth of a deepwater drilling fleet, which numbered 17 in 2000 and now numbers closer to 300, which is one of the reasons that i'm kind of bullish about deepwater exploration. i think when it comes to elements of resource

nationalism, the inevitable temptation to buy brazilian material, the inevitable temptation to reduce competition between a state enterprise and international oil companies has significantly slowed the progress of development, as finally the new ceo of petr petro brass has admitted and putting place what may be a more reasonable production. that more reasonable projection is rather the path getting to the ultimate level of production. >> just to put this in context, compare the scale of the brazilian potential to the other pieces that steve laid out at the beginning, the various discoveries in africa and the north american scene. how big of a piece of supply

growth is brazil? >> it's a big piece. if you look at deepwater production in the u.s. when we hit 1.7 million barrels a day before the mccondo disaster, that was 30% of global production, a number that had gotten to that level of roughly 4.5 million barrels a day pretty quickly. deepwater had been growing at about a 10% rate per annum and there was no reason to think that would stop in the next decade, so the brazilian piece of that, you know, doubling from 2 million today to 4 million by 2018 or 2022, the number is a significant number. >> we have time for one last quick question, the gentleman in back there. >> thank you, bill murray from "oil daily." when we're talking about by 2020 the possibility of having in the imports down to less than 3 million barrels a day and including nafta probably being net long, and staying away from

the policy, of course, does it make any sense whatsoever to start to consider to ask the question about spare capacity in the u.s. and what value that would be as a tool of what strategic value that would be? >> i think that's a great question for the next panel, where we'll talk about broader implications of this. let me turn it into a question about the resource base. are there parts of the resource base where the initial capital investment is low enough that you could imagine there being essentially standby capacity in the united states? >> well, actually there is now, if you look at the natural gas part of this business, where there's no export release valve and there's no demand pickup, we have effectively spare capacity and if you look even at the 9 bcf a day and 65 bcf a day where natural gas has displaced

hundreds ofteens of coal in the last few months, but prices are going to go up and when they go up the resource base is like a justice just in time inventory of production capacity. >> adam? >> ed bringing up the natural gas situation, i actually wanted to do the to do the same thing. it kind of addresses two questions that were asked there. one is, you know, can you conceive of possibility that oil prices, at least in the u.s., you know, or globally can be forced down? we have the example of what happened with natural gas prices. if you were to extend that into the resource base, i think it's also really fair to say that even five years ago, and certainly ten years ago, nobody had any idea of what the development of the gas resource base could be and would end up being in the u.s. and it's very possible that we might discover

exactly the same thing about oil. that resource base would support much higher production than current estimates. >> we are out of time on this panel. thank you, adam, and ed, for a fascinating discussion that i think has helped us understand what conditions might be required to see this age of abundance come to pass and what uncertainties there are as we look forward. we're going to move straight into the next panel where we will discuss the implications of all this. [ applause ]

>> what if america becomes energy independent? what are the geopolitical implications of that? going to assume that the age of oil abundance -- >> no mike. audio. >> the panel now is going to presume.

is the sound on? >> barely. >> sound on here? >> yes. >> all right. the panel now is going to presume that the age of oil independence does materialize and look not at the energy implication but the gegeopolitil implications of shoving all those billions of oil of surplus on to the market. the moderator is susan glasser who's the editor in chief of "foreign policy can "magazine. >> thanks, steve, thanks, everyone. can you hear me now? how about this? here we go. we have a cast of thousands as you can see. luckily, the good news is, no opening statements. no, i mean, this is really -- this is a terrific opportunity i

think to have a conversation that all of us are looking forward to having which is what are we supposed to make of it? so let's not throw more numbers at everybody right now for the purposes of this discussion. steve has given us strict marching orderes. let's take as a given this idea of new age of relative north american oil and gas abundance is upon us and let's really start to unpack what are the gee wro geopolitical implications of that? obviously it's speculation. that's great. that's a washington sport we all excel at. i think it makes for a pretty good conversation. it's such an all-star cast. i'm not going to slow us down with long introductions. but we do have michael levi who you've already heard from who's the director of the council of foreign relations program on energy, security, and climate change. adam sieminski who you've also already heard from who's the add straiter of the u.s. energy

information administration. ed morse who is the managing director and global head of commodities research at citigroup. ed chow -- i'm sorry. robin west. ed chow, strategic and international strategies, and john hofmeister who was of course the president of shell oil company. so i can't think of a better and more distinguished group to sort of walk us through what some of the consequences are and where we agree and probably disagree about some of those consequences. so i'm actually going to jump right in here and i'm going to ask ed morse who said recently that this new age of abundance in north america beckons to make

north america look like the new middle east. so maybe you can start us off with what your tour of the geopolitical horizon looks like when all this oil and gas comes online. >> yeah. i know you don't want any numbers, but i'm going to have to give some. it starts with the fact that the u.s. has a current deficit of 3% of gdp. our oil import bill is 5% of gdp. you can paint a bunch of different pictures, but one of them you can't avoid is if this happens the deficit will no longer be a significant issue. and as michael has argued in various places, as have others, the current account deficit and protection of the dollar has been one of the big achilles' heel of american foreign policy. and we will be freed of the shackles of that, if nothing else, looking to a world where

the dollar would be maintained as a reserved currency for a long period of time. the other thing that comes as a consequence of not having the current account deficit impact judgments of foreign policy is we can have a better value of based foreign policy. we're no longer going to be kowtowing to dispodic rulers or monarchs whose oil supply lines are critically important to other aspects of foreign policy. and those tradeoffs will be eliminated. i am not -- because i know others will get into other areas, but these strike me as two really obvious places where energy independence makes a big difference. >> well, i definitely want to survey the group on whether they agree fully that we're tno longr going to be kowtowing to dictators anymore. but quickly, robin, you also have made some very interesting sort of sweeping sense of what this new age of energy independence could mean for us. i think you called it at one point the energy equivalent of

the berlin wall coming down, to talk about america becoming, perhaps, the world's top producer again. what did you mean by that? >> what i meant is this was the -- as the berlin wall coming down changed our perception of the world and our role in it. i think from an energy standpoint. i think it's very important, two things, one, two include canada in the united states you then have the u.s. as self-sufficient. energy independence is a dangerous term. rex tollerson said he didn't quite know who it meant and i tend to agree. but if we're self-sufficient, several things happen. one, i agree entirely with what ed's points are. one of the things also, there's tremendous change of crude flows. west african crude, middle east crude is already moving to asia, going to move even more. as a result, asian countries are going to be much more focused and influential on those parts of the world. by the same token, i was asked by senior diplomat from the

middle east last week, do you think that the american people will support 100,000 troops being sent to kuwait ten years from now to protect oil? i don't think so. i think this is a tremendous challenge for the military. there's one other thing, though, ed sort of alluded to it, that i think is terribly important in all this. this was a tremendous private sector free market success in a period of stupendous market failures in other sectors. and this happened -- the federal government had no role in this. 94%, 95% of the resources are on state and private land. the feds had nothing to do with it. it was a complete surprise to everybody, but it was driven by independent companies being very innovative, responding to high prices. and people forget that there