This is a transcript from ABC Radio National PM. The program is broadcast around Australia at 5:10pm on Radio National and 6:10pm on ABC Local Radio.
MARK COLVIN: If you think you’re paying too much at the petrol bowser now, brace yourself. An expert from one of the most oil-rich countries in the world says the price per litre could soon more than double, and he says that’s his conservative estimate.
Dr Ali Samsam Bakhtiari is a senior planning expert with the National Iranian Oil Company and he’s in Australia to warn that the world’s demand for oil is now close to outstripping supply.
The problem, he says, is not in the Middle East countries like Iran, Iraq and Saudi Arabia, which still have plenty, but in other producers such as Australia and Indonesia, which were both net exporters of oil but are becoming net importers.
And meanwhile, with China’s phenomenal economic growth, the worldwide demand is growing and growing, and now it regularly matches peak production of 81-million barrels a day.
The result? The spiralling prices we’ve seen in the last six months, from $30 a barrel last December, to a whisker under 44 today.
Dr Samsam Bakhtiari spoke to me on the line from Perth, where he’s speaking at the Sustainable Transport Coalition’s conference on living with less oil.
SAMSAM BAKHTIARI: The supplies side is limited. We are reaching the limits of the planet very soon. We can’t produce much more oil than we are producing today.
MARK COLVIN: Well how soon? What kind of time frame are you saying about this?
SAMSAM BAKHTIARI: I am talking about two to three years from now.
MARK COLVIN: Two or three years?
SAMSAM BAKHTIARI: Two or three years, yes 2006 or 2007.
It is always a supply problem. It is never a demand problem. The oil fields cannot produce enough oil anymore.
MARK COLVIN: So 81 million barrels a day – you are saying that the supply will not keep up with that within two to three years from now.
SAMSAM BAKHTIARI: Exactly, yes. That’s the maximum in my opinion that the world can produce.
MARK COLVIN: And if, for instance there is a big problem in Russia at the moment between the Government and the Yukos Oil Company, and that Yukos produces something like two per cent of the world demand, I understand. If that was cut out, if as you say, Australia, Indonesia, various other ones were cut out and we were left with the Middle East. How much would be left?
SAMSAM BAKHTIARI: You would still be left with a sizeable amount of production but cutting Yukos, cutting one, one point seven million out of the 81 million that you are relying on now would be a serious dent in the supply side. It would have very dramatic effect on the demand side, naturally.
MARK COLVIN: Now what are we talking about here when we turn to the world economy? Is this going to be comparable to the previous three oil shocks, or worse, or easier?
SAMSAM BAKHTIARI: If what I predict is going to happen in 2006 or 2007 then you will have a constant oil shock after that. So everything is going to change.
MARK COLVIN: So what would that mean? At the moment Australians, for instance, might be paying more than $1 a litre, sometimes $1.10 a litre. It depends where you are in the city or the regions – sometime more than $1.10 a litre, but what would you forecast for after 2006 – 2007 then, if you are correct?
SAMSAM BAKHTIARI: It certainly is going to go up. It certainly is going to go up but where, that will depend on many factors. It will depend especially on factors in the Middle East area, which is now producing roughly 40 per cent of the total crude in the world and this 40 per cent is going to increase with time naturally. But I could see easily prices of three or four dollars very, very soon for every litre of petrol.
MARK COLVIN: Three to four dollars a litre?
SAMSAM BAKHTIARI: Oh yes. Very, very soon, and that in my opinion would still be very good you know, because it could get much worse than that as well.
MARK COLVIN: Wouldn’t a price rise on that level have the effect of slowing world growth to such a huge extent that the demand would drop off really drastically anyway?
SAMSAM BAKHTIARI: Oh no, no, no, no. Demand will…
MARK COLVIN: Well isn’t that what’s happened in previous recessions?
SAMSAM BAKHTIARI: Oh yes but not this time around. You will cut demand first but then the supply is going to go down as well. In the previous ones it was not like that. You would cut demand and supply would go up and you would recalibrate the whole system.
This time you will not be able to recalibrate. What I’m saying is that you don’t have any more spare capacity neither in the Middle East, nor in OPEC, nor anywhere else. That’s why a problem like Yukos, which is a small problem after all, becomes such a big problem today.
MARK COLVIN: Because the system is so stretched that any little problem at the edges becomes magnified?
SAMSAM BAKHTIARI: Exactly and this you will have more and more. So you will have a brand new world very, very soon.
MARK COLVIN: Well what do you suggest that we do about it?
SAMSAM BAKHTIARI: Get prepared today, not tomorrow. Don’t leave things for tomorrow.
MARK COLVIN: When you say get prepared, what do you mean? Go into solar energy or change the type of car you drive? Go to electric cars? What are you talking about?
SAMSAM BAKHTIARI: There are 1,001 solutions already but you have to think about it. You have to study it and see what solutions you can come up, and there is no panacea you know. There is no hydrogen economy at the horizon. There is small little things in my opinion you can do and when you add these all up, it amounts to quite a lot, but you have also to get ready to live with less oil.
MARK COLVIN: Doctor Ali Samsam Bakhtiari, Vice President of the National Iranian Oil Company, speaking to me on the line from Perth where he is speaking at the Sustainable Transport Coalition’s conference on living with less oil.