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Clearly, the Chinese need the resources, but I don’t think they want to clash with the industrial world which happens to be the market for their goods.
If a war started, the oil price probably would go up, as you said, maybe $5, $6 a barrel until you saw other oil from the extra supplies that are available elsewhere coming into the world, into the market.
People always underestimate the impact of technology. To give you an example: In the 1970s the frontier for offshore development was 200 meters, today it is 4,000 meters.
But the key thing is that Iraq, while it’s got very large oil reserves, has marginalized itself as an oil exporter and these days its exports are only about one tenth that of neighboring Saudi Arabia.
We experienced similar fears in the 1880s, at the end of World War I and II. And we ran out in the 1970s.
We are living in a different world now. You can see it everywhere in international relations: It was noteworthy that, after his visit to Washington, the Chinese president’s next stop was Saudi Arabia.
But eventually it’s a question of access: Getting access to fields is on top of the oil companies’ agenda. We see a substantial build-up of supply occurring over the coming years.
The North Sea was supposed to run out in the 1980s. Then in the 1990s. And now production is still on-line.
We are living in a new age of energy supply anxiety.
The starting point for energy security today as it has always been is diversification of supplies and sources.
The other are the strategic, so-called strategic stocks that the United States and the other Western industrial countries have, which could put in as much as four million barrels a day of oil into the market pretty quickly.
Cycles of shortage and surplus characterize the entire history of oil.
Even Silicon Valley investors have put well over a $1 billion in new energy technologies.
I think the producers, for the most part, don’t want to see prices skyrocket because that will only create problems for them down the road and would also be a, you know, would be a very serious shock for a world economy that can’t afford serious shocks right now.
The bulk of extra supplies that could be put into the market come from two places. One, they come from other Persian Gulf suppliers, of which Saudi Arabia is at the top of the list.
