years but for decades if we unleash it and let it happen. and i include waste management as an industry that's part in parcel of how we grow going forward. >> adam, do you see other ways in which this can re-scramble the u.s. economy, you know, in this positive way, or, perhaps, in not so positive of a way? are we going to become a new -- an energy state? going to become trapped in the resource curse? >> well, in many ways this question of energy independence, wherever it takes you, wants to get there, we already are a net exporter of coal. we don't really import a lot of electricity. eia forecasts that we'll be a net export of natural gas by 2020, and we had a very thorough discussion of the potential on the oil side. as the only federal employee on this panel -- >> see, i didn't ask you whether you thought president obama would benefit from this. >> i would say that the role of

the federal government has not been, i don't think has been as negative as some have characterized it. natural gas and oil and hydraulic fracturing, a lot of the 3-d seismic technology used in this got its start in federal labs. the independents that were responsible for the breakthroughs in natural gas fracturing were helped tremendously by a federal subsidy on natural gas production. it was a dollar a million btus at a time when natural gas prices were very low and it's hugely significant. you might think of that as being a better federal policies. it was a subsidy put on when needed and taken off when wasn't needed.

there are a number of things goinging on in terms of the federal government now. the president was out in oklahoma just a few months ago encouraging the federal agencies across the board to speed up in permitting processes for infrastructure developments. and, you know, a lot of things are happening, i think, that are much more positive than what you often see in the press. so my feeling is that the economics ultimately are going to drive this and the economics are positive that many of the things that we are seeing in the energy area will have very strong implications for economic growth and that the environmental issues that john has brought up and others can be managed. managing those will often require a state and federal regulations, but getting those

regulations right, i think, will actually help encourage development, not discourage it. >> so robin challenged us to bring up the subject that we haven't talked about much which is global warming and how this might scramble both the u.s. politics of it but also the international politics of it. michael, i know that's even a part of your job description, so walk us through your scenarios here. >> sure. let me, briefly, i think, elaborate on what adam has said, because it's important to be clear about what the president has done and what his strategy is. yes, there has been an effort to go after some relatively small tax breaks, tax treatment, whatever you want to call them. we're talking about something that adds up to $4 billion a year in an industry that is far larger than that, and there's legitimate debate about impact of the individual provisions, but let's not blow that out of

proportion. on the carbon front, it's also important to be clear that good carbon policy is perfectly consistent with this sort of oil and gas development we're talking about. if i recall correctly, in the latest annual energy outlook, there are a couple special cases, one with a $15 a ton carbon price, one with a $25 a ton carbon price. that sort of brackets the possibilities of what we would have gotten under waxman/markey. oil production increases in both of those modeling exercises because the c 02 price creates an incentive to capture carbon monoxide to enhance oil recovery. projections are not gospel, but that's a real possibility. that's actually the one big growth potential in u.s. production that we haven't talked about because there isn't a carbon price to create an incentive to make that supply of co 2 available. if you look at the basic economics of the issue, increased u.s. oil production is unlikely to have a large impact

emissions and increased natural gas emission particularly in the next decade or two is likely to displace coal and, therefore, e rer reduce emissions. the bigger potential impact on climate policy i think comes through politics. so some good extent, the discussion about climate policy to date has conflated several different challenges, one of which was greenhouse gas emissions and global warming but another was this idea of resource scarcity that we're running out and therefore need to go in a different direction. if that piece of the coalition that wants climate policy in place vanishes because of this sense of abundance, then i think it becomes more difficult to put good climate policy in place. now, you can argue the other way. every time you run the cost estimates of a model or a cap on greenhouse gas emissions, those estimates come in lower if you have more abundant natural gas because it makes it cheaper to meet your targets.

so you could imagine this helping in some ways. but it certainly scrambles things. there's no we about that. one -- i'll just make one more observation because you asked about the international politics of this. for the most part, people in the united states who care about climate change think natural gas is good news. there's a vocal community that thinks it's very bad news, in part based on some flawed studies on the leakage of methane and in part based on a basic belief of infrastructure trends, how we have to pick one direction or another. that is not the view in europe. in europe, natural gas is generally seen as a bad thing for climate change and a bad direction when it comes to climate change. and the international level, that will take us into some problems. when we go to an international meeting and say, look, we reduced emissions and are displadis pla replacing coal with natural gas, they'll say, that's not a positive story, that's a negative story.

that causes friction. >> that's a great point. does anyone want to weigh in? >> one point i'll make, i think waxman/markey, over a thousand pages long, mentioned it twice. >> it doesn't matter how many words are devoted to a resource in a bill. it's what it does to the economy. >> my only point is what happened, really, there was a big program, and a lot of political capital was invested in it and something entirely different happened. >> ed chow? and then john? >> what was certainly internationally in a world of plenty, particularly on gas, for india and china in particular, you've got the tradeoff of using domestic coal which is very dirty and which harms the environment, the air people breathe, and as income grow, the

population will become more and more concerned about these matters and if there's availability of gas, whether that's domestic gas because of the shale gas revolution in india or china, or imported gas, you now have a substitute that may be readily available that was not part of the equation at one time. but will become increasingly important. and once again, that's where the energy growth, and therefore, carbon emissions growth is coming from in the world and that will definitely bend the curve for them. >> john, i know you wanted to jump in. >> yes, i think europe's voice in the world i think can be loud and demanding, but europe's overall impact on the world i think is not all that great when you see the world's largest economy and the world's second largest economy pretty much choosing the path that they will choose. but let me say this about the oil and gas industry.

there is a very strong, and i would almost call it a passion, to things right. because when the industry gets it wrong, we see the disasters that occur. and so when it comes to regulations, the oil and gas industry is looking for clarity and continuity. because clarity and continuity you can manage. you can engineer toward it. you can make things happen with cement or with casing or with other innovations in technology to actually control leaks or to stop them altogether. so i think clarity is important. when that clarity becomes politicized and it's this program this year, another program another year, new regulation this year, a new regulations pending, that becomes very frustrating and that's when the industry kind of pushes back. but i think if there is a

tendency toward best practice and a tendency toward regulation using best practice, i think you'll get a lot of industry cooperation which has positive impacts on the environment. >> robin? >> one point i'd like to come back to, which ed alluded to, is there's a lot of shale elsewhere in the world, in china, in india, in argentina. people thought of poland and everything like this. but we estimate it takes about 1,500 wells to prove up a play. and with the exception of canada, there's no place in the world where they drill more than 100 wells. and what happened in the united states was a good, perfect storm in the sense that we had a huge service sector. we had a transparent gas markets. we had the ability of independence to get financing. high prices were driving it. there was a gas market. there was gas gathering, gas transmission. everything was in place for this to happen if these guys could

figure it out. if you tgo to places like china and we've done work with the ndrc and other groups, their fiscal system is all wrong. they don't have a -- it's going to take these other places a long, long time. and the point i would make is also, i said in the opening, i think that, frankly, some renewables may have much more application in those places than they to in the united states and i think it should be encouraged. >> okay. so we've had a very patient audience here, and i do want to give you a chance to jump in with your questions, too. we have a lot of folks. so if you can keep your questions to be really a question and give us your name and where you're from, that would be terrific. ma'am, we'll go ahead and start off with you. >> stephanie kinney. stephanie kinney, maxwell school. what you're depositing today is important but it's not very well known or understood. what kinds of actions do you see

as important in the next year or so? to get the public more broadly educated, and in particular university students. i have students coming out with tremendous debt who think they want to be ngos which will pay them nothing and they won't get their debts paid. energy is not something they think of. they take my sustainability and public policy course and yet the one area where you could both combine earning a living, a real job, and doing something worthwhile if you have the sustainability frame would seem to be energy. what suggestions do you have to attract the students coming out now into the areas that you need? >> john, this seems to go to your point. >> this is a critical factor as a public matter of national

wellbeing. the lack of information that permeates our society on all matters relating to energy and the environment is a very serious problem, and as i used to say in api meetings, american petroleum institute meetings, if you don't have the public on your side, then the public is against you. and the way to get the public on your side is information. and i founded citizens for affordable energy for specifically that reason and spent seven days a week trying to engage people at all social and economic levels across the country just to get information out. my website, citizensf citizensforaffordableenergy.org. it's basic, simple information about what it is, what's possible, what's not, what's important. we can't count on media because media have a different job to do

which is about exposing, not educating. there is a, i think, an outcome of some sort of education, so i welcome media all the time. and embrace media as an outlet but it is not media's job to educate the public on energy. our school systems badly lack any approach to energy. it's not taught. oklahoma is i, i thi think the state in the nation, education mandates at all levels of the school system. so we have this huge undertaking that has to happen for any of the success we potentially have in front of us to actually occur. and so i think it is not helpful when politicians vilify the source of economic value creation that comes from all sources of energy and whether it's right-wing politicians bad mouthing renewable energy or left-wing politicians bad mouthing hydrocarbon energy.

i know why they do it. it doesn't do any good other than for their own electoral results, perhaps. but i think we have to undertake this as parents, as leaders in society, as teachers of those who are coming after us. and we owe it to our citizens to do that on a sustained basis. >> adam, i know you wanted to jump in, too. >> right. well, i do come from the energy information administration. and i just had to say that eia has been trying very hard to help in this area, john. if you do an internet search, you know, and use a search engine and type in "energy information," we come up first. there's -- interestingly to me, because i did this the other day -- the third hit that you get in google or bing if you type in "energy information" is the eia kid's page. very, very popular. it's got a lot of really good,

basic information on where energy comes from, how it's transformed, how it's used. and it's, i think, extremely popular and i hope that that kind of thing filters down. the eia website has been redesigned. it gets hundreds of thousands of hits daily. and it's -- it's a very, very, i think, useful tool not just for kids but for everybody in the analytical community and in the policy community that's looking for answers to some of these basic questions. >> all right. i want to get to more questions here. sir? can you wait for the microphone? because i think we're -- >> department of energy. kind of a two-part question. mr. west, your firm puts out, i think it's -- i don't know the exact title, but the top 50 every year, energy companies.

i wonder, first, how this might shake up that list in a sense that much of the revolution, the development we're talking about is in the western hemisphere. what does this mean for previous national champ whereons like total, bp, others, given a lot of this is going on in the u.s., and traditional natural gas and oil plays are still under state control in countries like saudi arabia and others? and secondly, then, going back to the geopolitical implications of this, and this is maybe for the broader panel, we've talked about -- mr. chow mentioned shared global responsibility -- but we talked about the u.s. versus our engagement with india and china. what about and/or the gulf producers, our security agreements with them. what about our traditional consuming country allies, south korea, japan, europe? what does it mean for them if the u.s. is potentially more secure? >> good question. >> okay. in terms of the industry, what's happening in north america isn't

going to change list very much of the top 50 companies. one of the interesting things is that the -- it's important to understand that the north american unconventional plays tend to be -- it's a different process. you drill thousands of wells. what big companies, the exons and chevrons and toeltss of the world do, they develop enormous capital intensive, engineering intensive projects. big off shore projects. big off shore projects off the gulf of mexico or the project in canada. that's their business. this north american business, you've seen who's done it is largely the independents. some of the majors are looking at this and seeing if they can come into this. it's a big resource play. basically independents run their business for production growth. the majors run their business for returns and it's really -- it's a different model and a real challenge to them. although the majors are trying to figure out how to come into this. ed, do you want to touch on the

second part of the question? >> i guess my feeling is that it doesn't change things as much as people would like to, or maybe as quickly as we would like to. susan pointed out rightly that the somali piracy problem hasn't been solved. but just think of what it would be like if we didn't share that responsibility. this is a beginning of our experiment. we haven't done this sort of thing very much before, and it would be interesting to see how that goes. it is a shared responsibility with our traditional allies as well but at a time of plenty allows you to think more about the shared protection of the global economies with people we were once concerned about as their power inevitably, i would submit, increases if places like india and china. the traditional ally relationship will be in place.

i assume they will continue to want us to pay a fair share of that. how you define that fair share i think is the interesting question. >> pick up on this one. quickly. i think there's a bigger impact on the gas side than the oil side for a lot of the traditional allies. i side the biggest immediate benefit would be somewhat lower oil prices which would accrue to everyone and not just the united states. the potential downside is that the u.s. misreads the situation and scales back its investment in security around the world which will affect everyone. on natural gas we're already seeing consequences. the fact that the united states is not buying gas, lng, from the middle east freed up supplies and put europe in a much stronger position with respect to russia and that's shaping up geopolitics of gas in europe. we could see changes in asia. we're having a conversation in this country about potential natural gas exports. i don't see them by themselves

being revolutionary but they're an important piece of the puzzle that gives consumers, particularly korea and japan, more leverage in dealing with producers and potentially take some of the politics out of natural gas trade. that's a good thing for u.s. allies and a good thing for the united states. >> okay. we've had a patient gentleman here in the front. i'll try to get to as many of you as we can. >> robert, president of international investor. if you'll forgive me, from what i've heard so far, i think you guys missed the biggest story here and that is that instead of the one single world price market for petroleum and other energy commodities, we are starting to see a divergence between what i call western hemispheric pricing and the brent price for example. we saw as much as a 20% divergence between brent per barrel, oil prices at one point this year. and that spread seems to be

continuing. we believe at least from our analysis in talking to a lot of experts that we're going to -- this is something big that's happening here in terms of an independence and it's going to put us in a position where suddenly -- let me bring this to a question for you. suddenly we're going to see a world in which not only is the united states capable of operating on its own, the pricing mechanism will be different for our hemisphere than the rest of the world. we will be less concerned with what happens in terms of crises overseas. the real question becomes with the pressure on the federal deficits, do people start turning and say we should price or at least tax the barrels that go into our domestic economy differently than those that are exported abroad? we've seen other nations do this.

norway, russian federation and they actually bring in a lot of tax revenue by putting heavier, larger taxes on the energy consumed outside of their country. do you see the possibilities of this? >> that's a word we haven't heard until now. >> it would violate the constitution of the united states to place an export tax on anything. that's just as a basic rule which is being reaffirmed repeatedly by the supreme court. that makes it less likely. >> i think i disagree with the premise fundamentally. it is true the differential between brent and wti has reversed itself and that is for a lot of technical reasons that we probably shouldn't get into on this panel. but they still track. it's not like, you know, consistently brent rises and wti

falls. it is true the differential have flipped but that doesn't mean that the world pricing relationships in terms of a global market has changed at all. the norwegians were insulated from effects of rita and katrina. their prices went up at the same time even though they had nothing to do with them and even though their net exporter prices still went up. i don't agree with the premise of the question. >> okay. sir? you go ahead and we'll get the other gentleman. >> sorry. we had a long discussion about our supply shock, abundance, resources, how about the man shock. you are forecasting for it to grow but a lot of people are discussing china may experience

much faster oil consumption if the current industry -- they assume driving patterns to the united states and all that stuff. i just would be interested in your opinion around that issue. >> okay. >> if there's a little bit of controversy over what we think about supply, there's significantly more controversy about what we think we know about demand. i think there are a couple of issues that you raise that are really important. one is what is the share of world gdp that goes into energy costs when brent prices were moving toward $130 a barrel, not so long ago, three months ago, percentage of global gdp was at record level. the same level that it was at in the latter part of the 1970s. you had to do a lot of arithmetic to get there but i'm pretty sure that was the case,

which may be one reason why there is really a cap on prices because impact on the global economy at a certain level is really very high. the other observation i would make and this goes to issues about what we think about china in particular let alone india, is that demand doesn't slow down. it comes to a tipping point. and on the history of european union of the original e-6 or japan in 1973-'74 or korea through the late 1990s or malaysia and taiwan is that they had incredible growth. it was double digit growth in all of these cases and then a wall was hit all of a sudden and that level of petroleum product demand was never exceedsed. japan's record year of product demand was 1974. the six countries the record

year was 1974. if you look at china and there's a lot of controversy about the data and a lot of controversy about what might be going on, but two years ago, june or july, the annualized growth of demand for power in china was 20%. a year ago was 10%. today it's 2% to 3%. petroleum product demand in china this year has grown less than 1% year on year. there's something going on. it may be that the structure of the economy is changing. it may be that the big period of time of focusing on infrastructure, commodity intensive infrastructure has come to an end or the economy is in a slump. time will tell. to the degree we know about demand, it can come to a tipping point. >> i promised that we would end

on time. i'm going to close this with a quick lightning round to all of our panelists. this is a terrific conversation. there is more we could get at. i would like to ask everyone for a winner and a loser for the premise of our question that this energy boom has happened, a particular one we haven't talked about so far. michael, because you just looked at me, you're first. >> that we haven't talked about yet? >> or you can resurface one. >> we talked about every country in the world as far as i can tell. winner, the united states. loser -- thank you for the suggestion. russia. >> the audience is going to get to vote on this afterwards. adam? >> i think that the winner is the average american wage earner. i think wages go up when we develop more and if we can

manage the environmental issues, which i believe we can, everybody wins here. as far as losers are concerned, i don't see it that way. i think that positive development here doesn't mean that anybody has to lose whether here or overseas. >> what about those dictators in the middle east? ed? >> i would like to believe in one globalized world in which everyone shares in a growing pie. the fact is there are winners and losers. the audience and michael picked on the obvious winners and losers being the u.s. and russia. not simply because what's happening is related to oil and gas exports but russia is a commodity dependent country. i think single crop countries in the commodity business really are in a eurozone world when it comes to this business and that makes for