there were a million people on the brooklyn bridge from gas brownouts in the summer, i think it was 2005. it was a big crisis. prices were high and market worked. and i think if you look at so much energy policy, i think a lot of politicians feel that energy -- as said, war is too important to be left to the generals. and i think politicians believe that energy policy is too important to be left to the market. and i think markets work pretty well. i can demonstrate this. there's one last point that i think people have overlooked and that is -- part of the narrative of the united states, going back to the '70s, was we were an energy glutton. and we were wasteful and spoiled and the fact of the matter is -- i mean, the president likes to say we're 4% of population, we consume 20% of the energy.

the u.s. economy is 20% of the global economy and we use roughly 20% of the energy. that's about right. population is a demographic, not an economic input. and the fact of the matter is the whole narrative of the u.s. in the world, its role in the world, and our, as i say, the sort of selfish energy glutton, that's going to change as well. i mean, i think this is -- i do think this is on a scale of the berlin wall coming down, but i would also point out there's a book written after that came down called "the end of history" which was completely wrong. and i think that -- >> maybe it was just ahead of its time. >> way ahead. the fact of the matter is a lot of thought, in a lot of places around the world, tremendous decline rates. the notion there won't be tightness in oil markets globally, i think there will be tightness in markets. i think that certain

technologies, renewable technolo technologies, they may not work here because gas prices are so low. they might work in a lot of other places. i think -- it isn't over. this is part of a continuing saga. >> there's just so much to unpack here. i do want to bring in john because you talked about sort of the role of private companies and, you know, i think 2005 to 2008 was when you were, you know, sitting from a very interesting vantage point. how would it look if you were sitting there today in terms of in your role as not only head of a company but as a geopolitical czar of sorts, right? you know, how has the landscape changed from when you were leading an oil company? >> my last advice to the board of directors of shell when i retired in 2008 was to steer capital away from the united states because the united states was so confused on energy policy going forward that government had taken on not just in the current administration but prior administrations as well the role

of disabler rather than enabler. and as we move through the '50s, '60s and '70s of the last century, government was primary enabler of the great expansion of the economy that occurred in the post-world war ii period with major legislative movement to make things happen for the american economy. and i think until the american government, the federal government in particular comes to grips with whether it will be the enabler of prosperity or the disabler of markets, which it seems to have a much higher priority in disabling, i think if i'm heading an american oil company looking at use of capital in america, i would be very careful. i would be very selective. and i think that's really what we're seeing. there are so many american companies out there, however, that have huge capacity and the entrepreneurial spirit is alive and well that we are seeing what

we are seeing. trees don't grew to the sky. we learned that a long time ago. and so all the perspective growth in domestic energy supply could be achievable, but it also could not be achievable. depending upon the kind of macropolicies that we will set at a governmental level. market only has so much strength and, yes, private landholders and state permits have enabled what we've achieved to date, but we could do so much more. we really could do so much more. not only in oil and natural gas production, but in substituting natural gas as a transportation fuel in the internal combustion engine by making ethanol, let's say, from natural gas with flex fuel engines and more rapidly if we changed fuels we're using. at the same tie time we open up domestic assets we have.

here's a limitation we shouldn't forget. the oil and gas industry today has 100,000 job openings it can't fill. we don't have an immigration policy that works. 100,000 jobs going, that would accelerate more activity in the oil and gas fields. an educational system that is not bringing forward the stem educated students that are necessary to equip the companies with the numbers of graduates they're going to need going forward. it's not just natural resources, it's human resources that matter as with well. i spent monday in west texas, tuesday in louisiana. everyone i talked to can't find machinists, truck drivers, can't find people that will pass the drug test, can't find offshore workers, can't find engineers. can't, can't, can't, can't. this is a limb thags we ought to

be worried about as a nation. it's not just the oil and gas industry that can do something about it. there are other institutions in the country that have to help this process. >> i want to quickly take this actually outside the u.s. for a second and i want to ask ed chow, what about the rising countries and demand from china and india, new players? brazil obviously is a producer. russia is a producer. how does the rise that we're presuming for the purposes of this conversation, how does it scramble what our assumptions are about the relative political weight of those countries, if they're looking at the u.s. in a digit w different way? does it change things? are we being overly optimistic in thinking it gives us a stronger hand? >> i think it changes things. i'm not sure it always changes things the way we hope for them to be changed. certainly in terms of energy investment around the world, i think in the time of plenty, which is what we're assuming, it

would take the zero sum game nature of the compensation out of the equation. we have this mixed feelings about chinese energy investments around the world, and if there was not a concern over the lack of supply here in the united states, maybe that concern will dissipate. in fact, we have already seen -- we haven't noticed it which is why -- which is the interesting part, that the amount of chinese investments in north america has not raised the kind of concern that the unic orow approach by chevron did when a company was interested in unicow. so we've already seen a much more relaxed attitude toward china's investment abroad and

india will be following suit very soon. after all, they are the incremental demand center of the world now. not america in this time of plenty. their economy will continue to grow at two, three times our natural growth rate. so it takes away that element which on the geopolitical standpoint i think is healthy. it was never a healthy thing that we had to begin with. i know you told me in the hallway i should try to disagree some. >> the secrets of a moderator revealed. >> i'll do my best to poke the idea of when we are going to be less concerned about middle eastern oil. >> yeah. >> and whether it was true or not in american people, at least american government, will no longer be sending troops to liberate kuwait or anywhere else because we have become or will

become more energy self-sufficient. middle eastern oil and gas still important to the rest of the world. and our economies are intimately linked to the rest of the world. there is only one global power that can secure that supply today. rightly or wrongly. are we, therefore, going to relinquish that role? are we, therefore, going to cooperate with others? i'm thinking, again, about chip china and india in terms of the global responsibility of making sure through oil and gas supply that the global economy is also healthy and not just our own domestic economy. i'm not so sure. i would like to probe that notion a little bit. clearly this is not going to happen overnight. it will be a transition. will that change the thinking on washington's part about a blue water indian navy, blue water

chinese navy? this is a panel on gegeopolitic. i think this is the sort of thing we haven't really thought about very much and needs to be discussed more in this town. >> michael, i definitely want to bring you in here. i have to admit many of my facts from this conversation have come from his terrific piece in "foreign policy" magazine in which he urges us to think again about the american energy boom. i think, one, you also have brought, i think, a little bit of a note of questioning to the conversation about how much does a new moment of energy plenty translate into a moment of more political independence from the middle east? that's certainly what everybody would like in a sense of sort of breathing a sigh of relief. but is that really just around the corner? >> it's striking in listening to the conversation how often words like healing and attitude and variations on that theme come up. it points to an important

distinction of how this would effect our perceptions and the underlying economic and physical dynamics of the oil market and its relationship with the global economy. i actually agree with robin and ed that this is likely to effect our perceptions. look at history, oil and international politic, one thing you find is oil influences international politics because people think oil influences international politics. then they act based on those beliefs. those action have world consequences. if you think it matters saudi arabia is a big supplier of oil, you'll do things regardless of that. regardless of the fungibility of oil markets. reality is affected by perception. that said, reality is also affected by reality. and as ed has pointed out correctly, we live in a globally integrated oil market. it's not perfect. it's not the theoretical economic ideal that some people

sometimes claim or more often assume exists. but we essentially do. and even if we are producing as much as we consume, this is the assumption for this panel, when something goes terribly wrong in the middle east, the only way to insulate the united states from a price spike which would be economically damaging would be to bar exports. whether because we've not allowed construction of export capacity, or because we have said by law you're not allowed to export oil. otherwise it will be drawn to other parts of the world in order to equalize prices. that would be a big decision. perhaps that's something that would happen. i wouldn't want to assume we're going to decide to break down this sort of open system for global trade in oil. now, there are a whole lot of other geopolitical implications. if prices go down substantially, that changes relative power of various countries in the world. ed, again, pointed to this important piece on fdi. we talk about geopolitical

implications as a consumer. we're used to thinking as a consumer, being how we thought for 40 years or so. if you think as a producer, you get into fights about export policy, trade policy, foreign direct investment policy that has pretty big geopolitical implications as well. >> so, adam, i'm interested in your thoughts on this part of the conversation. i also wanted to step back and actually look at putting aside the u.s. for a moment. right. these have been times of high oil prices internationally. what is your sense of what is the number at which it really begins to scramble some of the internal politics in a country like russia, for example, which has built a lot of assumptions into its budget of continued high oil prices? where does the price of oil start to affect potentially political stability in certain parts of the world? what's your feeling about that? >> well, a number of analysts, both in government agencies and

private sector companies, have analyzed budget break-even prices for a number of countries on oil. if they were a large oil exporter. i think ed already pointed out that a number of countries, russia, nigerinigeria, for exam have very high budget break-even prices. a number of others have fairly low break-evens. if you just kind of consider that range, northeamost of the a year ago were falling in the -- the average was falling somewhere in low 90s. let's say $92 up to $95 a barrel. actually because of higher prices and somewhat higher production in a number of these countries that budget break-even has come down somewhat. it might be in the mid 80s now rather than the mid 90s.

kind of skipping over that for a second and going back to one of the major themes that have been brought up by virtually everybody here on the panel, i think one of the things that needs to be considered is, you know, what does this really mean for the u.s.? ed hinted at it that this is a huge potential positive productivity shock to the u.s. economy. so they can grow gdp, grow employment, strengthen the dollar, strengthen trade deficit. all of these things tremendously positive. one thing to keep in mind about this, and to expend it out globally, is that the u.s. has managed to make more progress in this area. both in natural gas and oil, than virtually any other country around the world.

and it will be interesting to see the extent to which developments in the u.s. proceed into other countries. so far, other than canada, maybe austral australia, it hasn't really moved as rapidly as you might expect it to. >> well, that's right. ed, what about china, for example? to we see prospects for them to experience a similar change in their internal energy picture? >> that's why robin's the -- >> two eds. >> i think it's just beginning is my perception. there are a lot of other things going on in the domestic chinese market, particularly with gas. preconditions of a shell gas revolution transferring into china such as gas pricing which

they're starting to experiment with in a couple provinces. it will also potentially change their relationship with russia in a time of plenty for gas around the world, russia's need to diversify its market becomes urgent than at a time when western europe didn't have the availability of lower price ong as a substitute for russian gas. so it would make it easier for the russians and chinese to come together on the deal. something they've been working on for a long, long time but never get there. so i think there are a number of implications both for china both in terms of domestic gas production potential, both in conventional gas, methane, in

addition to shell gas which will come next. we'll find that out in the next five to ten years but not the next couple years. and china's role in the international gas market will also change. >> okay. so, ed, how do you respond to the question of whether we're being -- letting our sort of hearts lead us when it comes to the prospect of being more independent from the entanglements of the middle east as a result of this? >> you know, i'm not moved in a lot of ways, but by that, i think there's much more c consensus on this issue than otherwise might be the case. you know, clearly the u.s. has broad international interests. clearly mike is right in talking about the role of oil. i'm thinking about the role of oil in the middle east since i've been looking at the subject, as others in this room have been. when the u.s., oil in the middle

east, other than commercially developing it by companies in the least modern history, it was to make sure that russia didn't get control over middle east oil. when the cold war was over, interregional relationships became the driver rather than the cold war. and, you know, there are bound to be other issues that will arise. as long as i'm speaking, i really do want to make a point that others have made and i think we've let go. adam made it and robin has maid made it publicly many times talking about the u.s. -- it's this issue of oil self-sufficiency that's driving what's happening. there's an sbrindustrial investt boom that's unfolding. it's likely to accelerate. there's a lot of evidence it's

accelerating. the lag has been some of the things john has talked about. the leg hassaying, hey, we have opportunity to negotiate good tax terms with those who want employment. we're seeing a change in the petrochemical industry. it's based on the other thing being produced. ngls. has incredible implications on petrachemicals. the steel industry has become really transformed as a symbiotic relationship between drilling and need for tubular steel, creating distribution networks and needs for different kinds of tubular steel. and the u.s. is seeing incredible flows in inward investment into the steel industry. the manufacturing jobs that we think we can look at in very

conservative way, or order of magnitude between 3 million and 4 million between now and 2020. so the implications, gege geopolitically, include what's happening in the u.s. economy and it's pretty profound. >> i have two two-finger interventions. th both michael and ed chow wanted to intervene. quickly. >> the picture ed painted is really important. because it takes us to a time in our history where we did not have as free and open of a global trading system. so preferential arrangements for oil trade and preferential tariff systems and all these things made geography matter a lot more than it does today. where we had a world superpower rival, soviet union, that we worried would invade large parts of production and therefore be

able to produce supplies. we're not in that world. we could be in that world in a couple decades. it's very difficult to predict how the future will unfold. one important thing to keep in mind when we talk about all this supply picture is that its impact on the world on a sort of linear course without many changes from where we are today is very different from when the impact might be if we end up in a world that is very different when it comes to global trade, when it comes to global security. if we end up in that world in 20 years, then the fact we have more abundant supplies, or depending on what we've extracted between now and then, will have potentially different implications. >> okay. ed? >> i learned many years ago not to disagree with ed. and i only do it when it's necessary. and i certainly don't disagree with him at all on the positive

aspects, profound positive aspects on the domestic economy of this natural gas and oil production boom in north america. i was trying to make a different point, and that point is that that self-sufficiency if we were to achieve us does not isolate us from the global economy. as we found out today, based on what's happening in europe right now. so perhaps supply from the middle east is not so critical for us anymore, but where does that lead the global economy and who's going to secure the supply lines from the middle east? we have this kind of mixed feelings about when the chinese, in particular, start doing too much to protect their own interests. we feel threatened when they do that. when they don't do enough, we call them a free rider, right? so somewhere between the two we have to figure out what the mix

of cooperation, collaboration, as we are doing, say, with the somali pirate problem with chinese and others right now. of how to share that global responsibility even if that middle east supply is no longer so critical to our own economy. >> i would note that this has been a record year for somali privacy so far. so might not -- cooperation in and of itself might not necessarily be the key to solving problems. so i want to go back and i want to ask robin and john to start us off in a conversation now about what are the u.s. political implications of this? both in short term, this is an election year, and we're already seeing actually both campaigns in some way talking a lot more about energy than you might have expected a couple years ago. but i just -- i'm really curious for both of your takes both in does energy and this energy boom play into the 2012 presidential

campaign? and then in a more long-term sense, do you see it being associated with one party or the other? >> i find it fascinating that one word has not been mentioned once on this panel today, carbon. and the president has said climate/carbon is one of his priorities in the next administration. and i think that, frankly, if waxman was the basis, if that was really their philosophical legislative statement, this was kind of a euro green approach. big transfer of wealth. it was to use government regulation to drive in new technologies. and i don't think there's much support for that in the country. it's very interesting, last week ago friday was the hottest june day ever recorded. increasingly on the weather, or the news, the weather, there's talk about isn't it awfully hot?

it seems to be hot all the time. there's something going on. and so i think that the issue of climate is an interesting issue. i think that -- i think that governor romney is going to come out for a much more pro-market shifting power to the states, opening up public lands. one of the key issues is epa. >> right. >> that's really where the power lies in this whole issue. and the other thing is that you have states like pennsylvania a and ohio. there are a whole bunch of new oil producing states. so the political calculous is going to change domestically. but i think that in the end, one of the president's regular tag lines is he really doesn't like the oil industry. i think that's fair to say. and he wants to tax it more. and it's a target. i think there's a real danger, what some congressmen and others

have said, one of the dangers, ed alluded to this, what could screw this whole thing up is infrastructure and the lack of infrastructure. and if there's -- whether it's using regulation or not changing legislation, i think that there is a chance this thing could be stymied. and it could come from washington, although it was initiated by the market. >> john, do you agree that this potentially cuts against obama even though on many ways this has happened on his watch, whether he's had anything to do with it or not is a different question? >> i think the politics of energy are hugely important in the national dialogue, in the corporate dialogue and it will be a major discussion factor i think as the campaign carries on. and there are many, many points of view with respect to politics of energy in which everyone can be right and everyone can also be wrong. what do i mean by that? well, let's be clear.

energy and the development of energy, and i'm talking all kinds of energy, not just oil and gas, could be the basis, as was suggested, of a whole new era of prosperity changing the economy, changing the revenue flow to the government. changing the deficit position of community and states and the federal deficit, itself. if we could unleash all of this prosperity. at the same time, we'd choke on our waste. and i think we could actually turn waste management into part of the prosperity as well. i think the president is waring thin when the whole discussion is around carbon, when it really should be around waste. because it's water, it's land, and it's air. carbon only implies air, but there's a whole waste management industry that could grow with the increased prosperity in the production of natural resources

at the same time. i think the both and, whoever can get the "both and" story right to the voters will be more successful. this either/or business just doesn't work. we've had miserable experiences the last few years with gasoline prices in the first and second quarter. leading to near recession in the third quarter. the last three years. stock market volatility. people are tired of the uncertainties of, you know, low growth, slow growth, no growth. and what people are looking for is, you know, a way for the economy to rebound and sustain that rebound and to experience real growth. i think the opportunity is there. i think either party could grab it and run with it, and i maintain a nonpartisan position, to a member i talked to, but the reality is this country can be poised for such