Chevron’s O’Reilly: Global Oil Demand is the Culprit
Posted by Keith Johnson
Chevron boss David O’Reilly has reached a sobering conclusion: The days of cheap oil really are over.
Mr. O’Reilly is hardly a peak-oil proponent, even as some of his Big Oil colleagues have made peakish noises. In an interview with the WSJ (sub reqd.), Mr. O’Reilly, who’s seen crude prices increase five-fold on his watch, said oil won’t return to the halcyon days of the 1990s. That’s not because of a lack of supply—in contrast to other O’Reilly theories on oil—but rather because of relentless global demand growth.
Chevron CEO David O’Reilly (Associated Press)
Three years ago, Mr. O’Reilly made waves by warning cheap oil was a memory, but it went on to more than double in price since then. The WSJ asked him to peer into the crystal ball again:
Mr. O’Reilly: I can’t predict what the price is going to be. You would have to tell me what the economic situation in the world is going to be a year from now. I don’t think it is going to get back to those relatively low levels we experienced in the late ’90s and early 2000s.
WSJ: Ever?
Mr. O’Reilly: No.
But what are the implications of higher oil prices—beyond bigger profits for oil companies?
In the U.S., Mr. O’Reilly says there are already signs of changing behavior, with people trading gas-guzzling cars for smaller models and using less fuel. He’s even changed cars himself, though he admits “I’m not driving in a Prius, if that’s what you’re asking.”
But that alone won’t do much to alter the global oil dynamics. More people driving in more countries cancels out small efficiency gains elsewhere. Developing countries’ thirst for oil in particular knows no bounds, he said:
I was in Turkey a couple of months ago. The price of gasoline is almost $11 a gallon. They’re selling a record number of automobiles. Traffic is backed up all over Istanbul.
Theoretically, he said in the audio portion of the interview, higher oil prices should “attract alternative energy,” such as the “tremendous effort going into wind [power] in this country.” Even though Chevron doesn’t stand to make any money off wind power, that’s still “a healthy thing,” Mr. O’Reilly said, because the world needs both fossil fuels and alternative energy to keep working.
But that’s the big question—do higher oil prices really drive more alternative energy? Not always, it seems. Stay tuned.
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Even Mr. O’Reilly(Chevron's CEO) says that he still can’t get his head around current oil prices, which closed above $145 a barrel on Thursday, a record.“We can see how you can get to $100,” he says. “At $140, I just don’t know how to explain it. We’re surprised." (NYT) |
