In this episode of Intelligence Matters, host Michael Morell speaks with Frank Verrastro, senior adviser on energy issues at the Center for Strategic and International Studies. Verrastro offers insights into how shifts in energy supplies and consumption affect national security, and how the trend toward decarbonization may affect dynamics and diplomacy among key global powers. Verrastro and Morell discuss ongoing deliberations with Iran and involving the Nord Stream 2 pipeline, as well as the Biden administration’s push to modernize American energy infrastructure.
- POLITICS OF GLOBAL ENERGY INTERDEPENDENCE: “I worry sometimes we’re getting into a position where we’re creating an axis of enemies. So we’ll sanction Russia – for good reason – Russia or China or Iran or Syria. And if the Middle East falls out of favor, they are likely to partner up. China still needs energy. We’ve seen the investment they’ve made in Africa, in Venezuela and in the Middle East, and if the United States retrenches and pulls back from some of these areas, we create a vacuum. And so what we think is good policy now, because it’s not in our national security or economic interests, may down the down the road come back to bite us a bit.”
- EFFORTS TO UPDATE AMERICAN ENERGY INFRASTRUCTURE: “[T]his is like a once in a generation reinvestment in America that we really need to do. And it’s beyond just bridges and roads. It’s 5G. It’s the electrical system. It’s medical supplies. It’s food delivery. And I think the pandemic has shown us and this is one of the challenges where what was in vogue a decade ago, just in time, inventory, building and relying on the global marketplace, people are rethinking that.”
- FUTURE OF OIL AND GAS: “In the next 20 years I think we’ll still be using oil and gas. I hope it’s significantly less because we need to do that. But the pace and timing are just important. I would think by mid-century you can get a handle on this. Different states and different countries now are trying to impose all new automobiles. You know, post-2035 or 2040 will be electric, but that’s new. And then you factor in the issue of equity, social equity – maybe affluent people can afford to buy a new car and get no trade in value for their old one. Poorer people, not so much. So it’s a question of how much the government helps, and sticks and carrots in Western society is what we use, as opposed to mandates. But that’s not out of the question either.”
INTELLIGENCE MATTERS – Frank Verrastro
PRODUCER: Olivia Gazis
MICHAEL MORELL: Frank, welcome to Intelligence Matters. We’ve been wanting to have an expert on energy on the show for some time, and I think we’re very lucky to have you. So thank you for joining us.
FRANK VERRASTRO: My pleasure. Happy to join you.
MICHAEL MORELL: I’d like to start by asking about a handful of current issues and then move to some more strategic ones, if that’s OK. The first one I want to ask about is the pandemic. The economic recovery, at least in the West, from it and the energy needed to fuel that recovery. Are there issues here that we need to be mindful of and that need the attention of governments and and companies?
FRANK VERRASTRO: Yeah, absolutely, Michael. That is the single biggest energy issue. That’s the dilemma about how we come out of the post-COVID cycle and go into economic recovery and at the same time transition to a new energy forum while still ensuring reliable and affordable energy to everyone that needs it. And I think that’s the dilemma that everyone from the United States to China to Russia to the Middle East is facing right now.
BP just put out a statistical report which showed that the global retrenchment was three and a half to four percent last year. It’s the largest peacetime recession we’ve seen since the Great Depression, and energy demand dropped almost five percent. So there was an obvious reshuffling of energy forms – oil, gas, coal, renewables. But fossil fuels continue to make up 80 percent of the global energy mix, which is a challenge as we move to decarbonise for climate change.
MICHAEL MORELL: And and as countries start recovering, are we seeing shortages of energy the same way we’re seeing shortages of other products or not so much?
FRANK VERRASTRO: So not so much. But it’s a timing issue, right? So the good news is that carbon emissions dropped last year by six percent. But the bad news is that as we grow and as we grow fast, you’re going to use the energy forms that your system allows. So you go back to – remember Don Rumsfeld, ‘You go to war with the army you have.’ We have so we go to our energy usage, which the fuels that are available. So oil right now, OPEC has worked off much of the global surplus. They were successful in that regard. And in fact, at this current time, depending on your forecasts for demand, it looks like the next quarter, oil is going to be tight. So over the weekend, they resolved the dispute about how they were going to put more oil on the market. But they’re still concerned about the COVID varients, and does demand go away? There’s concern about how fast Iran comes on. What about Libya? What about Nigeria? So we’re not out of the woods yet, but it’s a tighter balance for sure, but we’re almost at the end of the driving season as well.
MICHAEL MORELL: And there’s real economic differences around the world, right? There’s countries that are recovering and there’s countries that are still struggling right now, still in the deep throes of COVID. Is that affecting energy flows in any significant way?
FRANK VERRASTRO: So, it is, absolutely. East of the Suez is still kind of blowing and going. Europe seems to have slowed down with the new Delta variant. Transportation, especially airline fuels, is still off. Diesel fuel is off. Gasoline is up in the United States because the economy is doing better. People are off for the summer. So they’re seasonal variations. And the, as you said, the pace of recovery around the world is very, very uneven.
MICHAEL MORELL: Frank, another issue which you’ve already mentioned is Iran going to ask about Iran in the nuclear negotiations? I’m assuming – would love your view, but – I’m assuming that there will be a deal between Iran and the international community that brings Iran back into some form of a nuclear agreement with the West. And I’m wondering what would be the impact on energy markets of Iran’s ability to, again, freely sell as much oil as it can?
FRANK VERRASTRO: So I totally agree with your assessment. I think that’s where we’re headed. And I think the Biden administration made clear that getting back into the JCPOA is something that they were intent upon doing. The question is the timing, right? So with the new election in Iran, it looks like the next round negotiations won’t be until August, which means even if sanctions are removed or relieved, you’re not going to see substantial new supplies on the market until the third and fourth quarter, which actually makes the OPEC decision somewhat problematic for Iran because the agreement they cut over the weekend was to gradually relieve the world of the the supply shortage that we currently have, or the tight balance in the market. So they’re putting extra oil on the market to the tune of 400,000 barrels of oil a day starting next month and every month thereafter. So Iran right now is producing two and a half million barrels a day, they have the capacity for about 3.8, how they try to put that additional oil on the market, and where they send it, for example to China, or to go to Southeast Asia is going to be a real issue.
MICHAEL MORELL: Would we see them put that oil on the market and other countries not react and see the price fall, or would we see somebody like Saudi Arabia take some oil off the market to to allow Iran some room?
FRANK VERRASTRO: So if you’re a buyer at this point, you’ve actually probably been buying distressed cargoes out of Iran because they have still been exporting. Right. But they have been exporting it back below market prices. And that’s what makes it attractive, the risk and the reward for doing that. The Saudis at this point – OPEC did not actually go into the notion of how we accommodate Iran. And I’m not sure that there’s a strong feeling in the group that they have to accommodate Iran for an additional million barrels of oil a day, unless there’s a huge supply crunch, but obviously if that were to happen, there would have to be a cutback somewhere or you see a price adjustment.
MICHAEL MORELL: And how much of a price adjustment are you talking about for another million and a half barrels a day, do you think?
FRANK VERRASTRO: Well, so it depends when it comes. The first quarter is traditionally a low demand quarter and we build up demand through the year. So as as demand moves to the rest of 2021, if the recovery is there and COVID doesn’t set us back, that there’s a good chance that additional supplies would be welcomed in the market and moderate prices to the 60s. If Iran is allowed to put all of their additional oil on the market and demand is not there, that would, I think, instigate another price collapse and OPEC would have to meet and decide what to do towards the end of the year, whether they would prorate adjustments and cutbacks and the precipitous price decline if we had that would affect us producers as well who are now just starting to increase rig counts because we had $75 oil as recently as last week.
MICHAEL MORELL: So, Frank, the third third issue I want to talk about and ask you about is ransomware attacks. As you know, we’ve seen a spike in such attacks, including on energy infrastructure. As you know, we just saw, for example, a ransomware attack that significantly affected gasoline supply in the eastern part of the United States. And I’m wondering, from your perspective, are energy companies becoming a particular target for ransomware attacks? Are they targets for the Chinese and Russians as they think about what they might want to attack if we ever gotten to a hot war with them? How do you think about all of that?
FRANK VERRASTRO: So those are terrific questions and our colleague at CSIS, Jim Lewis, just testified on ransomware in the Senate. And you talked about the Colonial Pipeline attack, and the good news on Colonial was that the oil is fungible. It can move in tankers and trucks, by barges, alternate pipelines, rail. So the supply disruption wasn’t as bad as it looked to be because people put the gasoline that should have been at secondary storage at gas stations in their tanks and carried that around in their tanks, so there’s a lot of panic buying, including in states that did not have a disruption, by the way. But you’re right. And those kind of cyber attacks can go to nuclear facilities. They can go to electrical grids where replacement is not as easy because we don’t have as much redundancy in some cases.
But, you know, Jim’s point when he testified was that ransomware and these attacks – this is a business. It’s a business activity that rigorously researches its targets and attacks obvious vulnerabilities. The solution and we talked a little bit about this at the first order is really better – what we call cyber hygiene practices. So it’s more secure program coding, better encryption, multifactor authentication that reduces the opportunities to get into the system. But not everyone does that. And I think businesses have been a little bit lax in that regard.
So Biden’s executive order, working with businesses and especially energy and critical infrastructure should help that. But at the end of the day, especially in the case of ransomware – it’s the Kremlin, so the conversation that Biden had with President Putin, if the Russians allow this to continue, there’s got to be some form of retaliation by the United States just to show we have the capability, but then rules of the road going forward – and you’re right, it’s not just Russia, it’s China. It’s other countries as well; Iran. So it’s going to be an ongoing problem.
MICHAEL MORELL: So I’m wondering if if these cyber criminals specifically target critical infrastructure because they believe that, infrastructure being so important, the companies are more likely to pay. I just don’t know. Do you have a sense?
FRANK VERRASTRO: So – and that’s the two edged sword, right. So the companies that are involved want to get operations back to normal as quickly as possible. On the other side of that, the public and government outrage is more likely to draw some kind of a retaliatory action if this continues.
MICHAEL MORELL: And the cyber criminals need to balance that, is what you’re saying?
FRANK VERRASTRO: I think so, right. So, I mean, you can play the game and see how far you can push it, profitable venture. But if you draw too much fire and direction, what’s the downside? It’s a risk-reward game. And the country that’s hosting you, I would think, that if you don’t have coverage, say, in Moscow, political cover, then you’re exposed. And at that point, it gets just too risky to do.
MICHAEL MORELL: What happened in that in the Colonial Pipeline? Did the did the hack itself shut down operations or was that a business decision that followed the hack? I was never clear on that.
FRANK VERRASTRO: So Colonial maintained that they never actually got into operating systems. The concern was that they could have infiltrated and so they manually shut down a lot of the systems and turned it off.
Now, the problem with that, good news, bad news, is, is by turning it off, you minimize the damage. But with big pipeline systems, you don’t just turn them right back on again. So it took a while to see if there was any damage, where the gaps were and how to fill in in the secondary storage to keep continuous supply going until you get the pipeline up and running. And the interesting thing was, as a result of the pipeline not moving any oil, crude oil prices in Louisiana and Texas dropped because it had nowhere to go while gasoline prices, product prices on the East Coast went up. So it’s not like we were short of the raw material. It was a question of the logistics of moving it from point A to point B.
MICHAEL MORELL: Frank, the last sort of current issue I want to ask you about is the Nord Stream 2 pipeline, which has gotten a lot of attention. German Chancellor Merkel just had her final meeting as Chancellor with President Biden. And as you know, they are on opposite sides of this pipeline issue. And I was wondering if you could explain to our listeners what the issue is and why it matters.
FRANK VERRASTRO: So Nord Stream 2, in my mind, on a commercial – we’ll take the commercial side first. It strikes me that neither the Obama administration, the Trump administration nor the Biden administration, were going to be able to successfully stop a pipeline construction that had been ongoing. It’s an $11 billion gas project that pipes natural gas from Russia. Nord Stream 2 went through an alternative route from Nord Stream 1. So it’s not like additional gas supply is going to Germany.
But the Germans felt that it was a secure source of energy and they rely on Russian gas for like 80 percent of their gas needs. The concern in the EU and in the United States from a geopolitical sense was that the Germany and possibly Europe was getting overly reliant on Russian pipeline gas. And then secondarily, or maybe primarily, depending on where you live, that Nord Stream 2 would circumvent Ukraine. And could that be used as a lever for the Russians to do more damage to Ukraine without any retribution.
We’ve seen disruptions in Ukraine, though, going back 15 years. And the solution to that problem really is, different connections, additional storage, possibly LNG facilities, new feeder lines, instead of solely relying on Russia. None of that has seemed to happen.
I think the bigger concern for the Russians at this point is not so much the turn down by EU or the US pressure, but when you look out 10 or 20 years, the European Union now wants to reduce reliance on natural gas and increase markedly the use of renewables and their gas consumption has been flat or declining for years. And if you’re Russia, you either ship it to China, which is a long way to go to get to the eastern provinces, or ship it to Europe or make it into LNG, which is a little bit more costly.
So Russia’s got an issue where where there’s Ed Chow, who, you know, Ed Chow is also a colleague at CSIS. And and Ed basically says his test for pipelines is if if it’s a bankable project and the buyers and sellers are willing to do it, it generally gets done. And I think that was the case. There’s a lot of political rhetoric around it for different reasons. Some Republicans say, you know, stop Russia, export more US LNG. That really hasn’t happened. And there’s been an opportunity to do that. So I think Europe is connected by pipelines to Russia. Russia needs to sell the gas. Germany wanted the gas. That deal was consummated in the bigger scheme of things. I think there’s a lot more political hay that’s being made out of this without a lot of substance and fire below it.
MICHAEL MORELL: Below it is the is the Ukraine risk that if there’s a second pipeline that Russia could cut gas to Ukraine without cutting gas to Europe and therefore it makes Ukraine more vulnerable. Is that the idea?
FRANK VERRASTRO: That’s absolutely the issue and then there’s transit fees for other countries that would have benefited from having a pipeline across their area. And the case of Ukraine, I think the Europeans added a condition to Nord Stream 2 that if there’s any action taken that is targeted at Ukraine, that supplies and purchases would be cut. Now, I’m not sure what Chancellor Merkel feels strongly about how she’s going to deal with that, but so far she’s welcomed the pipeline, investment and construction.
MICHAEL MORELL: Frank, I want to get a little bit more strategic here. We’re coming up on the 50th anniversary of the Arab oil embargo when the world sort of woke up to the economic and national security importance of energy and the energy trade. And I’m wondering from, say, a 50,000-foot level, if you can talk a bit about how the link between energy and national security has evolved over the past 50 years and sort of where you think we are today on that link and where we might be headed. I know that’s a kind of a broad question.
FRANK VERRASTRO: So it is a broad question, but I actually cut my teeth on the early days of the embargo.
MICHAEL MORELL: I bet you did.
FRANK VERRASTRO: Well, I’d come to Washington out of college to go to medical school. And over the summer, we were already having shortages because of the Nixon price controls. I had known enough chemistry that I could read refinery flowcharts. And my first job was in the oil and gas office in the Interior Department, allocating oil and gas at the ripe age of 22.
The embargo gave President Nixon, President Ford, subsequent presidents, a sense of the vulnerability; US demand was going up and production was going down. So Carter, for one, introduced the decontrol which increased US production. The IEA was established as a result of this, the SPR, the Strategic Petroleum Reserve, was established, all to enhance our energy security. I think the single largest contributor to enhanced security for the United States, though, was the shale revolution, the unconventionals. Once we found that we could access source rock with no geologic risk, US production went from six million barrels a day to 13 million barrels a day. And we went from a net petroleum importer to a net exporter, which was just phenomenal in the space of less than 10 years.
MICHAEL MORELL: And is that primarily technology-driven?
FRANK VERRASTRO: Technology and price. So we always knew that the source rock was there because that’s where the molecules eventually came from and worked their way to the surface. But the ability to go into these formations and frack it and increase the flows just exponentially increase the success rate as well as the economics for getting both – first gas because the molecules are smaller, and later for light oil. And that turned the United States totally around and put us in a different perspective and a position with respect to, certainly, oil and gas.
With the increase in investment in renewables, our electric grid is now switching. And gas was one of the reasons that we were able to get off coal – gas and the fact that solar when the price came down. So our emissions have also gone down. But we’re in a new phase now where the focus on emissions and natural gas is methane, so CO2 emissions have to be dealt with, has changed.
So we’ve moved from energy shortage to energy surplus to now this new area. And I guess that’s one of the points I’d like to make that totally support the Biden proposal. I worked on his energy plan and his climate plan in 2019. But the notion and the sequence of how we get there – 2030, 2050 – I think oil and gas is going to be around for decades. We just have to manage it. And, as we move the decarbonisation along, increase investment in technology and renewables, electrify the grid and make it resilient so that we can make this transition.
For a country in the Middle East – I think this is the other side of it. So Saudi Arabia recognizes that at some point the world is not going to need as much oil as they have. I think it was Sheik Yamani that that said, you know, ‘The Stone Age didn’t end because we ran out of rocks,’ and oil will be depleted long after we need it or the need for it will go away before the resources are depleted.
So the Vision 2030 was to diversify the Saudi economy. They’ve done that a little bit. The price fluctuations over the last five years have made things more difficult because it restricted revenues. But you see it in the UAE, you see it in Qatar. Countries are moving in that direction. The question is, if we don’t do this right, do we put ourselves in a position for as long as we need oil? You take it away from the United States or Norway or Canada, and the world relies on producers in Russia and the Middle East to provide that resource. We still have 250 million cars in this country that run on gasoline and they’re not going away any time soon. So we have to be smart about how we do this.
MICHAEL MORELL: So, Frank, do you buy into this argument that the Middle East is now less important to the United States because we are net oil exporters or not?
FRANK VERRASTRO: So I think from an energy perspective, that is true. I think as we look in the future and see the competition with China, the Middle East strikes me as playing a more important role.
In the Obama administration they talked about the pivot to Asia. It wasn’t to leave the Middle East behind, but there’s a recognition and this is where geopolitical alliances can also change. I worry sometimes we’re getting into a position where we’re creating an axis of enemies. So we’ll sanction Russia – for good reason – Russia or China or Iran or Syria. And if the Middle East falls out of favor, they are likely to partner up. China still needs energy. We’ve seen the investment they’ve made in Africa, in Venezuela and in the Middle East, and if the United States retrenches and pulls back from some of these areas, we create a vacuum. And so what we think is good policy now, because it’s not in our national security or economic interests, may down the down the road come back to bite us a bit.
MICHAEL MORELL: And in fact, we saw a deal some months ago, right, between China and Iran, with both countries trying to do exactly what you’re talking about.
FRANK VERRASTRO: Well, and it’s the same with Russia, right. So the pivot to be able to undermine the position of the United States while enhancing and providing economic benefit to these countries, they’re realizing it’s not a net sum game, that they’ll be allies in certain times, they’ll be competitors at other times. And that’s, I think, the world we’re in.
John Kerry was talking about on the climate piece how even with China’s horrible human rights record and cybersecurity issues and the South China Sea and the aggression, we still need them on climate change. And he talked about being able to compartmentalize our foreign policy. That’s easier said than done. And I think the same will be true with Russia.
MICHAEL MORELL: So you mentioned Venezuela. And I think Venezuela, correct me if I’m wrong, has some of the largest oil reserves on the planet. And obviously, oil production there has plummeted along with the rest of the economy. If Venezuela ever got its act together, how big a player could they be and how long would it would it take to get oil production back up? And what would that impact be?
FRANK VERRASTRO: So under normal circumstances, when I was with Pennzoil, we actually were in Maracaibo. So if you look at the resource potential of Venezuela, it’s heavy oil, it’s very heavy oil. So it’s expensive. It’s not environmentally desirable. If the world needed oil, that would be a large resource area to go to. I almost think that they’ve missed the curve on this. Now, as the world switches to decarbonisation, lower carbon fuels, less oil, Venezuela production is probably one of the least attractive.
MICHAEL MORELL: So, Frank, really two more issues I want to talk to you about. The first is climate change, which you’ve already raised. You’ve worked in the government. You’ve worked in the oil industry. Just wonder how you think about the role of CO2 emissions play in the warming of the planet. Just put that out there.
FRANK VERRASTRO: So, I mean, the science is pretty clear on this. When you look at the time and post-industrial world emissions have risen through development. So, good things for the world, we provided more energy; we just haven’t done it with the focus of limiting emissions, and now we’re into that phase. To keep global temperatures between one and a half and two degrees centigrade the IEA just put out a study with a path, not the path, but a pathway forward. And if you look at the change that has to be made over the next 30 years – some of the changes that people are proposing for 2030, it’s to preserve your options, to stay along the arc of the pathway so you don’t totally blow yourself out of the water and then you’ll need new technology and new investments.
But to get there, even by mid-century, is a huge, huge challenge. We talked about the number of cars that the United States has right now to go to electric vehicles. You would need to modernize the entire grid so that everyone could charge their vehicle. And if you think about worse climatic situations with storms or hurricanes, just imagine a situation where everyone’s trying to get out of Louisiana and their electric car and there’s no power around the grid or the fires that we’ve seen in California. I mean, there’s ample evidence that shows us we have to move on this quickly. My concern is on the sequence and doing it smartly and to make sure that we stay resilient.
MICHAEL MORELL: Where are we on renewables as a significant alternative in terms of their cost and availability, et cetera, et cetera?
FRANK VERRASTRO: So solar and wind have grown exponentially over the last several years. They still globally make up, I want to say eight percent each of the energy mix, so fossil fuels make up around 80% in terms of primary consumption and nuclear, hydro, wind and solar make up the rest, but that’s in the low 20s combined.
So when you look at the change, the scale of change that has to occur, it’s significant. And as you talked about how individual countries have certain resources that they can use, if you have a lot of hydro, that’s great. If you don’t, that’s not all that good. Solar and wind, I think the applications can go almost anywhere. But then you have to provide the grid. There’s still a debate whether in this country you want to build out a big grid so that you can wield the electricity because the electrons don’t distinguish what they’re made from; once you create the electrons so you can just move them where you want. Or energy that’s closer to home, right, so that the people in localities, if something happens on the grid, not everyone is affected or you have a backup system.
So you have to balance the pricing with resiliency, the incorruptibility of supply, then you have cyber threats, but then the cost of infrastructure to do this, and this is what I think President Biden is trying to do in the infrastructure bill and then the supplemental, the reconciliation bill is to add a lot more infrastructure to update the US system.
I mean, this is like a once in a generation reinvestment in America that we really need to do. And it’s beyond just bridges and roads. It’s 5G. It’s the electrical system. It’s medical supplies, it’s food delivery. And I think the pandemic has shown us and this is one of the challenges where what was in vogue a decade ago, just in time, inventory, building and relying on the global marketplace, people are rethinking that.
Do we need to have stockpiles in individual countries? Do we really want to be reliant on other partners in the world? If you want to secure supply chains and China has looked at a lot of the materials that we need for renewables, how do we go about getting that? How fast can you build the system? And even in the case of solar, where China produces, I want to say, 80 percent of the silicates that are used in solar arrays that are marketable around the world – because of their activity in other areas, human rights and other things, we’re looking to put tariffs on some of those imports into the United States, which for utilities that we’re looking to buy – solar – how fast does that allow them to expand their system or does it retard the ability to get to higher renewable rates? And when you look again coming out of post-COVID, in a post-COVID situation, the cost of steel has like tripled. The cost of most manufactured goods and transportation of those goods to delivery; delivery times are longer. Costs are up. What does that do in terms of keeping things competitive?
MICHAEL MORELL: Frank, I’m just wondering about sort of the pace of change with regard to carbon usage in the West, the United States, in the West and in China. Is there a significant difference there? Is there a divergence there at the speed at which we’re going? Or is it pretty much the same?
FRANK VERRASTRO: So I think we talked a little bit earlier and said China’s trying to balance the need for economic recovery with climate change. President Xi put out an ambitious promise for green growth and a new surge in hydro and solar and wind and calls for a robust emissions, including a trading scheme.
But the details are still sketchy and coal mining in China is still huge. And it’s a big employer. China’s emissions are 28 percent. If you look at 2019 numbers, 20 percent of the global output, and that’s roughly equal to the U.S., the EU and India put together. So when you look at the population and you look at the potential for increasing and modernizing, it’s certainly there because it’s a state controlled industry. If the government dictates that, you can get that done. Less easy in societies where businesses are freer to do stuff, so you have to use a regulatory and legislative hand as well as price incentives.
But the emissions track that the IEA looked for, the commitments – we’ll see this fall in Glasgow when COP 26 occurs, all the countries are supposed to come to the table with increased ambition because they realize that the timeline on doing something about climate is much more compressed than they thought it was even five years ago. But translating those into workable plans and putting them into action is is a huge challenge just because of the scale and the diversity of the countries that are coming in.
MICHAEL MORELL: For Frank, let me ask you one more question. I heard somebody say the other day that the long term price of oil is effectively zero. This sort of goes back to your Stone Age point, right? Is that how you see it?
FRANK VERRASTRO: So at this point – until we find other substitutes. There’s an interesting analysis that I saw that talked about the electric car, you know, and people think that is changing out the gas-powered engine with an electric vehicle means you don’t need petroleum and 50 percent of the parts in the car – from plastics for the headlights or the seats or the steering column are polyurethane, all the polymers. Things that made the cars lighter and increased fuel efficiency largely came out of oil and gas.
So you would have to find a substitute for that, no matter what kind of car you drive. Polymers are in medicines and foodstuffs. The oil industry put out a report about what they contributed to protective gear, PPEs and how much petroleum-based product goes into that kind of material.
So the thought of not using any oil product at all I find difficult; there’s cleaner ways to do it, and there’s probably synthetic substitutes that you could use that might be more expensive. In the next 20 years I think we’ll still be using oil and gas. I hope it’s significantly less because we need to do that. But the pace and timing are just important. I would think by mid-century you can get a handle on this. Different states and different countries now are trying to impose all new automobiles. You know, post-2035 or 2040 will be electric, but that’s new. And then you factor in the issue of equity, social equity – maybe affluent people can afford to buy a new car and get no trade in value for their old one. Poorer people not so much. So it’s a question of how much the government helps, and sticks and carrots in Western society is what we use, as opposed to mandates. But that’s not out of the question either.
MICHAEL MORELL: Frank, thank you so much for joining us. It’s great to have you.
FRANK VERRASTRO: Michael, it’s been a pleasure.