Arab-US Policymakers Conference - Energy

Home > Articles > 2008 > Items of Interest >
December 4, 2008

Ms. Karen Harbert, Chair of the Energy Panel at the 2008 Arab-US Policymakers Conference. (Photo: NCUSAR)

Energy: A Complex Interdependence
(AUSPC 2008)
Karen Harbert

Editor's Note:

Each fall the National Council on US-Arab Relations brings together a distinguished group of diplomats, government officials, business people, military officials, scholars and others to tackle the thorny issues surrounding US-Arab relations. SUSRIS has provided AUSPC speakers' remarks, which touch on the Saudi-US relationship, to you for over the last five years. In keeping with that practice we again provide for your consideration a collection of AUSPC presentations.

Today we present the remarks of Energy Panel chair Karen Harbert, Executive Vice President and Managing Director of the U.S. Chamber of Commerce's Institute for 21st Century Energy, a new institute dedicated to developing a comprehensive energy policy for the United States. Ms. Harbert was joined on the panel by Nabilah Al-Tunisi of Saudi Aramco, Ryan M. Lance of ConocoPhillips, Jay R. Pryor of Chevron and Jim Burkhard of Cambridge Energy Research Associates. Their remarks will be provided separately. The panel was introduced by Dr. John Duke Anthony, President of the National Council on U.S.-Arab Relations.

Additional AUSPC sessions which address U.S. and Saudi issues will be provided by SUSRIS in the coming days. For more transcripts online check the index and link below.

17th ANNUAL ARAB-U.S. POLICYMAKERS CONFERENCE
�Transitioning the White House: Challenges and Opportunities for Arab-U.S. Relations�
October 30-31, 2008 | Washington, DC

[DR. JOHN DUKE ANTHONY] Ladies and gentleman, we have a session that is as apropos and timely and relevant as any of those we�ve had thus far. Some may think even more relevant given the economic aspect of it, given some of the policy controversialities, given what both nominees for President have said or not said about it, and what many people pushing this or that policy have persuaded Americans to conclude the United States ought to do, should�ve done all along, and should put a kind of a Manhattan crisis degree of seriousness to America�s energy situation, and its challenges and opportunities, particularly so between the United States and the Arab world producers.

We have the Honorable Karen Harbert to chair this session. She is the Vice President and Managing Director of the U.S. Chamber of Commerce�s energy project, which is a bold new innovative, strategic, visionary project. And immediately before that was the Assistant Secretary of the Department of Energy International Affairs, and was a speaker at one of our Congressional briefing series, precisely on the questions of energy dependence, independence, or interdependence, this last spring. Karen Harbert.

Ms. Karen Harbert, Chair of the Energy Panel at the 2008 Arab-US Policymakers Conference. (Photo: NCUSAR) [KAREN HARBERT] Thank you. It�s really wonderful to be here. And congratulations on this and all of your previous work this year that has been so important to strengthening our relations.

I would completely agree with you, there really is no issue that brings U.S.-Arab relations into starker relief than energy. It really highlights the opportunities and challenges of our relationship. It reveals a complex interdependence. It embodies the risks and rewards of collaboration. But most importantly, I think it shows the importance of maintaining and sustaining a healthy relationship between the Arab world and the United States people.

My job as chair of this panel is to do a little bit of a scene setter on trying to help you understand the world in which these companies are navigating, the landscape which they are operating, which I will do and then we will have each of them speak, then we will try and answer your questions.

I encourage you to write really hard questions, because I won�t have to answer them. But I will do my best to get answers for each of you.

First, what�s happening in the world energy market? Demand for energy is going to go up by over 50 percent between now and 2030. Seventy percent of that demand is going to be in the developing world. Electricity demand is going to go up by 100 percent, and yet one and a half billion people don�t have access to electricity.

So we have a very challenging demand forecast out there. How much money will it take to meet that demand? $20 trillion to meet that growing demand. Is that capital going to be available, and will that capital be able to be invested? What�s happening on the supply side? Well, access to hydrocarbons around the world is becoming increasingly difficult to get to. They are either geologically difficult to get to, they�re in geopolitically very difficult places, or some of them are in places that are increasingly hostile to foreign direct investment.

And we have new players on the market. The national oil companies are increasingly important. About 80 percent of the world�s proven reserves are owned by national oil companies. We�re seeing a significant rise in project costs around the world, whether it�s steel, or cement, or labor, the big infrastructure projects that are going to be meeting our demand are getting more and more expensive, and that�s a big drain on these companies capital budgets. And we�re seeing a lack of qualified engineers and skilled labor. In the United States, 50 percent of the energy workforce could retire in the next 10 years. It�s hard to get engineers. Are we, in the United States, are we in the Arab World investing enough in those qualified engineers to sustain the extraction, production, and delivery of hydrocarbons? And of course we�re seeing resource nationalism. We�re seeing countries that are manipulating their resources not to the benefit of the consuming nations. And in this country, we have a very, very difficult syndrome to deal with, it�s �banana.� Build absolutely nothing anywhere near anyone or anything. And so while demand is growing, we can�t build anything. So that is going to be a big strain in our economy, and we have seen it in lots of infrastructure projects whether they be domestic or internationally financed.

Let�s not forget we live in a global market. China has 30 million cars on the road today. They�re going to have 300 million by 2025. India�s demand for oil has gone up 6-fold over the last 10 years. So competition for resources is out there, and there are new markets and new opportunities for producing nations. So what is the demand picture look like? In North America, we see demand go up overall by about 11 percent. In the United States that could be anywhere from about 19 to 29 percent. In Asia, and in the non OECD, Asia�s going to go up by over 100 percent. But what we don�t talk about a lot is what the increase is going to be in the Middle East. The Middle East is going to consume 62 percent more oil in 30 years than it does today. There�s a huge increase in the domestic demand in the Arab world for new hydrocarbons resources.

Where are those resources going to come from? Well, the call on OPEC oil is going to become more and more in the coming years. And certainly, where in the world are there resources heavily concentrated? Certainly in the Middle East. The Middle East owns or has, and is blessed with over half of the world�s proven oil reserves. So the call on those reserves is going to grow and the importance of those reserves is only going to grow.

What�s happening in the market in which these companies have to navigate every day. So it�s not just enough to get them out of the ground and getting them to where they need to be, but they have to deal with the markets in which they operate and the prices in which, the market that dictates the prices.

We know economic growth around the world is driving non-U.S. demand. We�re seeing demand in the United States fall right now. Last August demand was reduced and driving was reduced in this country by over five percent. And we now see the response from OPEC countries in reducing production. So we are living in a time of volatility and fluctuations between changing demand and supply and they�re very, very hard to predict. We�re living in a time of a financial crisis, and so we don�t know what that�s going to do to demand and it is certainly calling into question the ability of countries and the ability of companies to make new investments and very large, very capital intensive long term energy projects. And of course we�re living in a time when there are new players in the market. There are speculators, and we live in a time when the dollar is changing dramatically in value in very short time periods.

Back in July, there was a poll done of the American public by Bloomberg, CNN, and the LA Times and they asked has the recent rise in gas and oil prices caused you or your family any financial hardship. Seventy five percent of the American public said yes. And then they asked in a different survey well, of those 75 percent that are mad about this, what do you attribute it to? And they attributed it to not oil companies, which had been previously who they attributed the problem to, but to the international competition for oil and natural resources.

So that�s not a very heartwarming feeling of the American public about what�s happening internationally. And that�s going to affect how we make decisions, and that�s something I hope we get to today, about how we have to overcome that public sentiment. But really what�s important, that this panel really needs to think about is that we are having real economic impact from higher oil prices. And because of the financial crisis we�re seeing falling demand that brings unprecedented financial volatility into our markets, and it makes these companies have very, very difficult decisions to make about where they put their investments and when they put their investments in the ground.

We�re dealing with an American public that is mad and we�re dealing with two Senators running for President that both believe energy is one of the biggest economic security and national security challenges of our lifetime, and will do something about it in their administration.

So it�s very unpredictable and I look forward to hearing from our companies about how they�re going to navigate these waters, and how the relationships that we had with the Arab world will only be that much more important in the years to come.

<end>

Arab-US Policymakers Conference (AUSPC 2008)

Transcription Services by Ryan & Associates

About Karen Harbert

Karen Harbert is Executive Vice President and Managing Director of the U.S. Chamber of Commerce's Institute for 21st Century Energy, a new institute dedicated to developing a comprehensive energy policy for the United States. Harbert is the former Assistant Secretary for Policy and International Affairs at the U.S. Department of Energy, where she designed and implemented energy policy initiatives and oversaw budget reviews for fossil, nuclear and renewable energy and energy efficiency programs. Previously, Harbert was vice-chairman of the International Energy Agency (IEA); she coordinated the IEA response to Hurricanes Katrina and Rita. Before joining the IEA, she was Deputy Assistant Administrator for Latin American and the Caribbean at the U.S. Agency for International Development. In the private sector, Harbert worked for a developer of international infrastructure and power projects valued at over $9 billion in the Middle East, Asia and Latin America. Harbert received a degree in international policy studies and political science from Rice University.

For more information:
http://www.energyxxi.org
http://www.uschamber.com

Related Items:

Saudi-US Relations Information Service
eMail: [email protected]
Web: http://www.Saudi-US-Relations.org
� 2008
Users of the The Saudi-US Relations Information Service are assumed to have read and agreed to our terms and conditions and legal disclaimer contained on the SUSRIS.org Web site.