I'm going to be speaking with Robert Fatalis, who is professor of political science at the
University of Pennsylvania and also author of the book Oil Craft The Myths of Scarcity
and Security That Haunt US Energy Policy.
So great to have you on.
I think at the time of a presidential transition where there are questions about if and how
policy will change around oil, it's a it's a very timely conversation.
Thanks.
It's great to be here.
So I guess to start with, when you talk about oil craft or the trick that is sometimes played
with the topic of oil, like what is the big trick?
What's the big misunderstanding?
Well, the big misunderstanding is that you don't have to do anything special to guarantee
access to it, especially during peacetime, meaning there's a world market in oil.
One just buys it.
That is how the military gets its oil.
That is how all domestic refiners get their oil.
So all talk about need to use military power to secure access or against threats are pretty
much untrue.
And can you talk a little bit about why?
So there's there's probably some people who will hear you say that and they'll say, OK,
well, there's an aspect of that that makes intuitive sense.
But at the same time, the world wouldn't necessarily grind to a halt if access to a different commodity
like pork bellies were somehow impacted.
It seems as though because so much transportation depends on oil, so many products, including
products that have plastic, come from oil and so many different things, it seems that
the implications are different.
Even if on paper we're talking about two commodities, why do you argue that there is not really
a difference?
Because the vision of access somehow being denied by some crisis is also something that
hasn't existed in in our lives.
So, for instance, right now, access is being hindered in all sorts of way to oil supplies,
but we hardly think about it.
What is the perfect example of that?
The United States government has sanctions on various governments that are oil producers.
Venezuela on the one hand, Iran on the other, that hinders access in in real ways.
But we don't talk about it.
Instead, what we imagine is some kind of, I don't know, like a disaster movie where
all oil, all oil production collapses.
We've never had an experience like that.
But we we generate constant, scary scenarios.
One of the global relationships that uses oil as a justification for being sort of a
special relationship or one that needs to be treated differently is the U.S. relationship
with Saudi Arabia.
And sometimes if you step back, it might be sort of confusing, given the democratic values
that so many administrations have claimed to want to spread around the world and in
fact, many of the military conflicts based on spreading those ideas.
It would seem counterintuitive that we would have the relationship we do with Saudi Arabia,
which represents much of what we seek to change in that region and elsewhere in the world.
But oil and a shared goal of stability in the region is often cited as the explanation.
How does your perspective on oil modify how maybe we should be thinking of that relationship?
Well, one that is correct.
Oil is used as the explanation for what we ostensibly otherwise would not do.
Right.
So and, you know, basically that's another scary scenario to that has that have trip
that has tripped people in the past.
So Americans who otherwise would not think we have some kind of we should be so closely
involved with Saudi Arabia except OK, but we need their oil.
And and so we have to kind of swallow our pride or not pursue our more idealistic side.
And that's fundamentally incorrect, as my favorite oil economist of the 1970s said back
then, and it remains true until now, the one thing Saudi Arabia has to do is sell their
oil on the world market.
The one thing we don't have to worry about is access to oil from Saudi Arabia or anyone
else has has to worry about.
Are there other relationships.
So you mentioned Venezuela.
We know about the relationship with Saudi Arabia.
Are there other geopolitical alliances or relationships that that are important when
it comes to oil that are much less discussed in media and that people may not understand
the role of?
Well, I think, folks, you can just think about the US position in the Persian Gulf, generally,
not just in Saudi Arabia, but in.
Bahrain, where the Fifth Fleet is located in Qatar, in the Emirates and and so forth,
we have this understanding that we have to be in the Persian Gulf to protect access to
oil.
And what I've argued and what the military has said time and time again in other experts
is that that is incorrect.
And so the real question should be, so what's behind that, behind the rationale of strategic
access to oil?
What do these regimes actually do for us that that keep us so closely tied to them?
I want to get to eventually in our conversation, some of the reasons why we've not moved off
of oil more quickly.
But before addressing that, because there are so many geopolitical relationships that
are connected to oil, there are significant, it would seem, diplomatic and foreign policy
implications that would that would rise if indeed the U.S. and the world were to accelerate
getting off of oil and towards renewable energy and other types of energy sources.
Is that intuition accurate in a sense, or do you believe that there would simply be
new justifications given for maintaining the status quo, which now oil is pointed to as
the explanation?
I'm you know, I'm usually trust professors to predict anything.
But of course, that said, I lean toward your second option there.
Right.
Other rationales will be created to continue to pursue the policies that we pursue now
that whatever else they do have no impact on, on access to oil.
We have a perfect example of this.
The United States is has has a large military presence in the Persian Gulf.
In the past weeks, Saudi oil facilities or oil transport have been bombed by ships.
And and the US is unable to to prevent the precise kinds of threats that we often think
is at the heart of our military presence there.
But does the the military want to stay there?
Absolutely.
All else equal the military presence is a benefit to the military.
They've never been really behind any kind of a retreat from positions where they already
secured what would be the and again, maybe I'm asking for a prediction or maybe maybe
we have a reason to think one way or the other if the excuse of oil were no longer credible
in terms of explaining a U.S. Saudi relationship, that doesn't seem to make much sense for the
reasons we discussed earlier.
What do you imagine would replace it as the justification will eat?
Well, whether it would work or not, whether Americans would come to say, OK, yes, we have
to do it, we have to accept our ties to the Saudis.
We have no other choice.
Well, one is a new one.
This is the one credit I give to Mohammed bin Salman, the de facto ruler, which is that
also to be a it's a it's a it's a plus on the side of Israel.
And those Americans who really think it's important that the Saudis are part of a coalition
with Israel against Iran.
Right.
And you notice in that discussion there's no talk about oil or the oil disappears.
Right.
And in fact, we'd be better off if Iran was producing its oil unhindered by the United
States.
It's of course, it's, of course, producing oil, but it's doing it with the assistance
of China at this point.
OK, so when we think about why we've not moved away from oil more quickly, we seem to have
the technological know how to do it to a greater degree than it has has been done.
And there are all sorts of explanations that are often given.
Some are more foreign policy related, including what you and I have been talking about.
Some claim that we simply don't have the efficiency in some of these alternatives to oil to generate
the energy we need, that while solar panels are improving and wind is improving, we're
simply not there yet.
And there's a debate about that.
And it seems that to a great extent it's not true is part about political willingness to
do it.
But but maybe to some degree we're not quite there.
There are other explanations given as well in terms of will.
It would damage this industry well, but it would prop this one up.
And then you have to kind of balance whether it would be a net job creator or destroyer.
If you had to give us a general assessment of why we've not moved away from oil more
quickly, what would it include?
A political will?
I think the obfuscating arguments of multiple, you know, vested interests in this process.
I've watched this, I've studied how these debates took place in the 1970s during the
so-called energy crisis, and there was a lot of confusion out there because to people of
different interests tend to argue their positions.
They tend to exaggerate, you know, the the significance or the or the or the importance
or the security threats to their various positions.
So I think lack of political will.
Yes, the technology is not completely there yet.
But at the same time, I've noticed something are happening for the first time, which is
the oil industry itself, or at least the largest segments of the oil industry.
The global the global producers are arguing, in fact, they are preparing for a peak, not
supply, which is how we used to talk about it, but peak demand that in fact, their predictions
are oil demand for oil will be declining over the medium term, etc..
So I think something is happening.
And what do they say would be the the catalysts for those declines in demand?
Concerns about global warming, the environment and the committee commitments on, I mean,
the commitments of various domestic groups to the fears of what climate change mean,
plus the plus the developments in the technology.
That's what economists have said.
At some point, oil will oil will simply become a wasted asset that will remain in the ground
because technology will shift such that we can we we will have a better energy source
sources to rely on.
So along those lines, the President Trump, the one that still president for a few more
days, he has said many times during his rallies and during various briefings, even briefings
unrelated to energy as they often are, he has uttered this this phrase that we are now
energy independent.
First question is, is that true?
And then a second question is, has fracking impacted the U.S. energy picture in a significant
enough way that it has separated us a little bit from the geopolitical oil situation?
OK, great questions.
No, we are not energy independent because we live in a one world market for oil.
Right.
We believe, you know, we have this fiction.
We think that domestic sources of supply is what the country first relies on.
And then and only then does it does it a turn to export?
That has never been true, number one.
Number two, even to the extent that we are now producing more oil through hydraulic fracturing
than we had in the then than we've had for a long time, the price of that oil depends
on events in the world market.
So there is no way to stop the what drives us most crazy in the day to day the volatility
and price of oil right now where prices are down.
But we remember back when barrels of oil were under two dollars.
Well, in the future, we are not able to put up walls against those price shocks unless
we turn to a kind of a domestic politics that we haven't seen in this country for decades,
which was which would be to create a new protectionist regime.
Right.
Not permit any or not permit any imports of oil and rely completely on domestic production.
Well, you know, that's been a failure in the past.
It's caused all sorts of problems in the United States.
And it's hard to imagine returning to that now.
Has has fracking reduced our dependency?
No, because it's it's just not the case.
So there's one there's an easy way to see that we can look at our oil import figures
and they're out.
We still imported oil.
Right, because certain users prefer the their own refineries are geared toward certain kinds
of oil.
And it's very difficult for them to move away from the oil that they tend to use.
Let me give you one good example that people never think of.
Yeah, folks argued they expected that with hydraulic fracturing, we would not any longer
be dependent on Saudi Arabia and Iran.
Imports from Saudi Arabia would decline.
Well, that's not true.
Why people forget that Saudi Arabia is itself a major refiner in the United States.
The largest amount of Saudi oil coming to the United States is to is to supply their
own refineries in the United States in the same way that a global oil company like Exxon
would do.
So setting up refineries in various countries in order to have guaranteed markets for their
crude, etc..
So Saudi Arabia continues to import Saudi Arabian oil into Saudi refineries in the United
States.
Real quick, the last thing I wanted to touch on and my my expectation is your commentary
on this would be more geopolitical than technological, but I'm glad to hear your thoughts.
Either way, there are folks on the left who are sometimes divided over the role of new
nuclear capacity and technology as a possible bridge from the current paradigm to renewables.
And there are some who don't like the sort of risk of nuclear.
While the more nuclear engineers I talk to, the more they say that those risks are really
based on 40, 50 year old technology, which is not what would be used if new nuclear was
put online.
So I'm sort of open to the idea of new nuclear as a bridge, Mike.
Concern is that practically, because it takes a while to bring that capacity on, it seems
it would be difficult to commit to it merely being a bridge.
What is your sort of thought about new nuclear as and its role?
Well, I think your your vision of that is yours is mine.
It's I think is is the correct one.
And also what doesn't often get talked about is the fact that those new nuclear plants
would be subsidized by the by government in one form or another.
Right.
It's very hard to do it economically now without subsidy.
So you can imagine another new industry seeking know, seeking those subsidies in order to
in order to get new plants operational.
You know, the text I read on this question, the debate is still open.
I've seen I've seen books by actually old friends of mine from graduate school have
argued this is this is the only real way forward, especially if what we care about is generating
electricity for the millions of people in India and elsewhere that still have no electricity.
Renewables are not going to be able to to to give the development that folks need around
the world.
And nuclear is the way to do that.
But I've also seen technologies challenge, challenge that claim.
So I think what we're going to see is, I mean, I can't resolve that right.
To see as more flights around that question.
And it's certainly there is certainly a visceral argument against it on the part of the left.
And I think that goes back to, you know, back to the 70s, to Chernobyl, to Three Mile Island
and so forth, to no nukes.
There was there were the concerns back then.
Right.
And the left is with you on this.
The left seems more or less committed to the idea of green New Deal renewables supporting
fossil fuels or any other kind of industry at the same time.
Yep, I agree.
An issue of critical importance and one, maybe two to expand on in the future.
We've been speaking with Robert Fatalis, who's a professor of political science at the University
of Pennsylvania, also author of the book Oil Craft The Myths of Scarcity and Security That
Haunt US Energy Policy.
Thanks so much for your time today and take good care of The David Pakman Show at David
Pakman Dotcom.