tv 60 Minutes on CNBC CNBC September 3, 2012 10:00am-11:00am EDT
"60 minutes on cnbc." i'm lesley stahl. i'm lesley stahl. thanks for joining us. [ticking] >> in a year's time, oil, a commodity that was traditionally priced according to supply and demand, doubled to nearly $150 a barrel, and then crashed along with the stock market. so what happened? well, it turns out the price of oil may have as much to do with traders and speculators on wall street as oil company executives or sheikhs in saudi arabia. >> i tease people sometimes that--you know, people say, "well, who's the largest oil company in america?" and they'll always say, "well, exxon mobil or chevron or b.p." but i'll say, "no, morgan stanley." [ticking] >> this is shaybah, a desert wilderness where temperatures can reach 135 degrees.
beneath these sand dunes lie 18 billion barrels of oil, more than four times the proven reserves of alaska. and it's costing billions and billions to tap into it. with all the talk about kicking our addiction to foreign oil, the kingdom of saudi arabia is doing everything it can to keep the oil age going. let me be blunt: is it your hope to prevent a switch away from oil? somebody said the country is the oil business. i mean, you absolutely need to do this for your own survival. >> and what's wrong with that? [ticking] >> when the u.s. oil companies came here in the '40s and '50s, the americans moved into the area with their families and developed it to suit their tastes and their way of life. they created a replica of american suburbia. today you could be in the outskirts of houston or los angeles. it's almost like it's an enclave
within saudi arabia. it's--different from the rest of the country. >> yes, that's true, because-- >> very different. it kept a lot of the american ways. >> yes, of course. >> but blocked off from the rest. >> they are good ways. there's nothing wrong with it. these were their excellent ways. >> welcome to 60 minutes on cnbc. i'm morley safer. in this edition, we follow the flow of big oil from massive, mega billion dollar oil fields in saudi arabia to the u.s. where wall street refines the oil into a mega billion dollar commodity. we begin with a look back to 2008 when the price of oil, theoretically tied to supply and demand, suddenly became untethered. storage tanks were full, yet the price skyrocketed from $69 a barrel to nearly $150 before it plummeted along with the stock market. there are lots of theories about what triggered the price rise. as steve kroft reported in 2009,
many people believe it had more to do with wall street speculation than with oil companies. >> to understand what happened to the price of oil, you first have to understand the way it's traded. for years, it's been bought and sold on something called the commodities futures market. here at the new york mercantile exchange, it's traded alongside cotton and coffee, copper and steel by brokers who buy and sell contracts to deliver those goods at a certain price at some date in the future. it was created so that farmers could gauge what their unharvested crops would be worth months in advance, so that factories could lock in the best price for raw materials and airlines could manage their fuel costs. but in late 2007, that market started to behave erratically. and when oil doubled to more than $147 a barrel, no one was more suspicious than dan gilligan.
>> we have to make sure that the futures market is an honest market. >> as the president of the petroleum marketers association, he represents more than 8,000 retail and wholesale suppliers, everyone from home heating oil companies to gas station owners. when we talked to him in the summer of 2008, his members were getting blamed for gouging the public even though their costs had also gone through the roof. he told us the problem was in the commodities markets, which had been invaded by a new breed of investor. >> approximately 60% to 70% of the oil contracts in the futures markets are now held by speculative entities. not by companies that need oil, not by the airlines, not by the oil companies, but by investors that are looking to make money from their speculative positions. >> they don't actually take delivery of the oil. >> no, all they do is buy the paper and hope that they can sell it for more than they paid for it before they have to take delivery. >> so they're trying to make money on the market for oil. >> absolutely--on the volatility that exists in the market.
they make it going up and down. >> he says his members in the home heating oil business, like sean cota of bellows falls, vermont, were the first to notice the effects a few years ago when prices seemed to disconnect from the basic fundamentals of supply and demand. cota says there was plenty of product at the supply terminals, but the prices kept going up and up. >> we've had three price changes during the day where we pick up products, actually don't know what we paid for it, and we'll go out, and we'll sell that to the retail customer guessing at what the price was. the volatility is being driven by the huge amounts of money and the huge amounts of leverage that is going into these markets. >> about the same time, hedge fund manager michael masters reached the same conclusion. masters' expertise is in tracking the flow of investments into and out of financial markets. and he noticed huge amounts of money leaving stocks for commodities and oil futures, most of it going into index funds betting that the price of
oil was going to go up. who was buying this paper oil? >> california pension fund, harvard endowment, lots of large institutional investors. and, by the way, other investors, hedge funds, wall street trading desks were following right behind them, putting money--sovereign wealth funds were putting money in the futures markets as well. so you had all these investors putting money in the futures markets, and that was driving the price up. >> in a five-year period, masters said the amount of money institutional investors, hedge funds, and the big wall street banks had placed in the commodities markets went from $13 billion to $300 billion. in 2008, 27 barrels of crude were being traded every day on the new york mercantile exchange for every one barrel of oil that was actually being consumed in the united states. >> we talked to the largest physical trader of crude oil, and they told us that compared to the size of the investment inflows--and, remember, this is
the largest physical crude oil trader in the united states-- they say that we are basically a flea on an elephant, that that's how big these flows were. >> yet when congress began holding hearings in the summer of 2008 and asked wall street banker lawrence eagles of j.p. morgan what role excessive speculation played in rising oil prices, the answer was little to none. >> we believe that high energy prices are fundamentally a result of supply and demand. >> as it turns out, not even j.p. morgan's chief global investment officer agreed with him. the same day that eagles testified, this email went out to clients saying, "an enormous amount of speculation" ran up the price, and "$140 in july was ridiculous." if anyone had any doubts, they were dispelled a few days after that hearing when the price of oil jumped $25 in a single day. september 22nd. >> september 22nd. >> michael greenberger, a former director of trading for
the commodity futures trading commission, the federal agency that oversees oil futures, says there were no supply disruptions that could have justified such a big increase. >> did china and india suddenly have gigantic needs for new oil products in a single day? no--everybody agrees supply-demand could not drive the price up $25, which was a record increase in the price of oil. the price of oil went from somewhere in the $60s to $147 in less than a year. and we were being told on that run-up, "it's supply-demand, supply-demand, supply-demand." >> a report out of mit analyzing world oil production and consumption also concluded that the basic fundamentals of supply and demand could not have been responsible for the 2008 run-up in oil prices. and michael masters says the u.s. department of energy's own statistics show that if the markets had been working
properly, the price of oil should have been going down, not up. >> from quarter four of '07 until the second quarter of '08, the e.i.a.--the energy information administration-- said that supply went up. worldwide supply went up, and worldwide demand went down. so you have supply going up and demand going down, which generally means that price is going down. >> and this was the period of the spike. >> this was the period of the spike. so you had the largest price increase in history during a time when actual demand was going down and actual supply was going up during the same period. however, the only thing that makes sense that lifted the price was investor demand. >> masters believes the investor demand for commodities and oil futures in particular was created on wall street by hedge funds and the big wall street investment banks like morgan stanley, goldman sachs,
barclays, and j.p. morgan, who made billions investing hundreds of billions of dollars of their clients' money. >> the investment banks facilitated it. you know, they found folks to write papers espousing the "benefits" of investing in commodities. and then they promoted commodities as an "asset class," like you could invest in commodities just like you could in stocks or bonds or anything else, like they were suitable for long-term investment. >> dan gilligan of the petroleum marketers association agreed. are you saying that companies like goldman sachs and morgan stanley and barclays have as much to do with the price of oil going up as exxon or shell? >> oh, absolutely, yes. i tease people sometimes that-- you know, people say, "well, who's the largest oil company in america?" and they'll always say, "well, exxon mobil or chevron or b.p." but i'll say, "no, morgan stanley." [ticking] >> coming up... >> is there price manipulation
going on? >> i-i can't say, and the reason i can't say is because nobody knows. our federal regulators don't have access to the data. they don't know who holds what positions. >> why don't they know? >> why don't they know? >> yeah. >> because federal law doesn't give them the jurisdiction to find out. >> that story and more when 60 minutes on cnbc returns. [ticking] we're sitting on a bunch of shale gas.
there's natural gas under my town. it's a game changer. ♪ it means cleaner, cheaper american-made energy. but we've got to be careful how we get it. design the wells to be safe. thousands of jobs. use the most advanced technology to protect our water. billions in the economy. at chevron, if we can't do it right, we won't do it at all. we've got to think long term. we've got to think long term. ♪
>> in 2008, the law of supply and demand, which normally drives prices on wall street's commodity exchange, suddenly went haywire. storage facilities were full of oil, but prices were rising when they should have been falling. gas station owners and heating oil companies who got blamed said they weren't the culprits; it was speculators and investment banks like morgan stanley. >> morgan stanley isn't an oil company in the traditional sense of the word. it doesn't own or control oil wells or refineries or gas stations. but according to documents filed with the securities and exchange commission, morgan stanley is a significant player in the wholesale market through various entities controlled by the corporation. it not only buys and sells the physical product through subsidiaries and companies that it controls--morgan stanley has the capacity to store and hold 20 million barrels.
the wall street bank goldman sachs also has stakes in companies that own a refinery in coffeyville, kansas, and control 43,000 miles of pipeline and more than 150 storage terminals. [horn honks] and analysts at both investment banks contributed to the oil frenzy that drove prices to record highs. goldman's top oil analyst predicted in march 2008 that the price of a barrel of oil was going to $200. morgan stanley predicted $150 a barrel. both companies declined our requests for an interview but maintain that their oil businesses are completely separate from their trading activities and that neither influence the independent opinions of their analysts. there is no evidence that either company has done anything illegal. is there price manipulation going on? >> i-i can't say, and the reason i can't say is because nobody knows. our federal regulators don't have access to the data. they don't know who holds what positions.
>> why don't they know? >> why don't they know? >> yeah. >> because federal law doesn't give them the jurisdiction to find out. >> it's impossible to tell exactly who was buying and selling all those oil contracts, because most of the trading is now conducted in secret with no public scrutiny or government oversight. over time, the big wall street banks were allowed to buy and sell as many oil contracts as they wanted for their clients, circumventing regulations intended to limit speculation. and in 2000, congress effectively deregulated the futures market, granting exemptions for complicated derivative investments called oil swaps as well as electronic trading on private exchanges. who was responsible for deregulating the oil future market? >> you'd have to say enron. this was something they desperately wanted and they got. >> michael greenberger, who wanted more regulation while he was at the commodity futures trading commission, not less, says it all happened when enron
was the seventh largest corporation in the united states. >> this was when enron was riding high, and what enron wanted, enron got. >> why did they want a deregulated market in oil futures? >> because they wanted to establish their own little energy futures exchange through computerized trading. >> she's gonna pay me a penny and a half. >> they knew that if they could get this trading engine established without the controls that had been placed on speculators, they would have the ability to drive the price of energy products in any way they wanted to take it. when enron failed, we learned that enron and its conspirators who used their trading engine were able to drive the price of electricity up, some say, by as much as 300% on the west coast. >> is the same thing going on right now in the oil business? >> every enron trader who knew how to do these manipulations became the most valuable employee on wall street.
>> but some of them may now be looking for work. the oil bubble began to deflate in the fall of 2008 when congress threatened new regulations, and federal agencies announced that they were beginning major investigations. it finally popped with the bankruptcy of lehman brothers and the near collapse of a.i.g., who were both heavily invested in the oil markets. with hedge funds and investment houses facing margin calls, the speculators headed for the exits. >> from july 15th until the end of november, roughly $70 billion came out of commodities futures from these index funds. in fact, gasoline demand went down by roughly 5% over that same period of time. yet the price of crude oil dropped more than $100 a barrel. it dropped 75%. >> how do you explain it? >> by looking at investors. that's the only way you can explain it. >> in july 2010, president obama signed the dod-frank act. it addresses many of
the regulatory lapses in the commodities market. among other things, it limits the amount of commodity futures that speculators can hold. it makes it easier for the commodities future trading commission to investigate suspected market manipulation, and it empowers the agency to regulate energy derivatives, which enron used to drive up the price of electricity in california. [ticking] coming up, a herculean effort to find oil in a desert wilderness. >> the logistics are impossible. the first thing we had to do is build our own road in order to access this field. >> just to get here. >> just to get here. once that was done, we had to remove 100 million cubic feet of sand just to make the runway. >> that's when 60 minutes on cnbc returns. [ticking]
in communities across the country. whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone.
as much advanced technology as the world around it. with the available lexus enform app suite, you can use opentable to make restaurant reservations. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. >> it's a never-ending struggle-- america battling to wean itself off foreign oil, and foreign producers doing all they can to make sure we stay hooked. one country eager to keep the u.s. a loyal customer is saudi arabia, the largest producer in the world. in 2008, lesley stahl went to meet one of the most powerful men in the world, ali al-naimi, the saudi oil minister and de facto head of o.p.e.c., the oil cartel. >> if most americans had an opportunity to sit down with the oil minister of saudi arabia, the thing they would like to know is where you think
the price of oil's gonna be, say, in about six months. is it gonna be up or down? >> you want my classic answer? >> no, i want your honest-- >> okay. >> appraisal and judgment. >> my honest judgment is, if i were to know what the price of oil six months from now, i would be in las vegas, okay? >> [laughing] he may be smiling, but this is a man with serious heartburn and vertigo. in 2008, the price of oil had been soaring and sinking uncontrollably. why did the price, in your opinion, spike in july? why did it go way up to $147 a barrel? >> basically, there was a-- what's called a fear premium. >> and the fear was that saudi arabia itself had peaked out, that you'd reached your ceiling of how much available oil
is left in your overall reserve. so what's the truth? >> the truth is, here is the kingdom with more than 260 billion barrels, and i firmly believe that the potential to add another 200 billion barrels of oil are there to be found. >> if the oil minister of saudi arabia had one message it was, there is no need for those fears. and to make the point, they let us see facilities that will increase saudi capacity from about 10 million barrels a day to more than 12 million. and they're going to the ends of the earth to do it. this is shaybah, a desert wilderness where temperatures can reach 135 degrees. the saudis say that 18 billion barrels of oil lie beneath these red sand dunes, more than four times the proven reserves of alaska.
to tap into it, the kingdom's national oil company, saudi aramco, had to build an oasis here. >> the shaybah story is an amazing story. >> awayyid al-shammari oversees the mega project at shaybah here in the kingdom's empty quarter. we're on soft sand. we're not talking about a hard surface here. look. this is what it's like here. i mean, this is soft. >> yeah, the logistics are impossible. the first thing we had to do is build our own road in order to access this field. >> just to get here. >> just to get here. once that was done, we had to remove 100 million cubic feet of sand just to make the runway that we are currently using, yes. >> 100 million? >> yeah, we had to remove a sand dune in order to connect two flat areas to do that. >> what about pipelines? >> we built a pipeline 400 miles in length, and you can imagine the challenge of building that
pipeline in a topography like this. >> but it was nothing compared to accessing the oil itself, which was discovered in 1968, but for 30 years was considered too hard to extract. >> now, with sand dunes this high, it's almost impossible, and the economics just didn't make it at the time until the development of the horizontal drilling. >> that's where you place a derrick on firm ground, then dig down with a drill bit that snakes horizontally under the sand dunes with branching tentacles like a fish bone. the drill bits can travel out for as much as five miles. you know, when we were growing up, we always heard about the building of the pyramids. this sounds like the building of the pyramids. >> it was a huge task for everybody. >> the shaybah facility is now being expanded to extract a total of 750,000 barrels a day of high-grade, arab
extra light crude. and when will you see the first drop of oil out of the new part right behind you? >> we will operate this facility very early next year. we're almost done. >> so the beginning of '09. >> absolutely. >> then on the other side of the kingdom, there's an even bigger mega project at a field known as khurais. it's also scheduled to go online in 2009. >> this is the biggest oil project in history. >> khalid abdulqader, the project manager, says 1.2 million barrels a day will be tapped here. that's more than the entire daily production of some o.p.e.c. countries like qatar and indonesia. wow, this is a lot of walking. the oil will be stored in massive tanks like this one, which is seven stories high. [laughs] look at this. >> yes. we'll go down. >> that is gigantic. it's 300 feet across-- the length of a football field. so can we go down?
>> yes. >> okay. be careful. be very careful. like just about everything at khurais, even the tanks have the latest bells and whistles. >> this is a floating roof. >> yeah? >> so when oil comes in, the whole roof will go up. >> will just rise up? >> rise up, yes. and the stair also will rise up with it. >> so, in other words, we're standing on the roof of the tank, and the oil will push it up? >> will push it up, all the way up. >> there's more oil in this one field at khurais than in the entire united states. it's the largest oil facility to come online anywhere in the world in nearly three decades with, the saudis say, 27 billion barrels of oil. has anybody projected how many years it's gonna take to deplete? >> it will take us more than 50 years. >> 50? >> yes. [ticking] >> up next, the khurais oil field, a place where sea and
looking for a better place to put your cash? re'say not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity.
were staggering. >> khurais presented a technological challenge. the field has very little natural pressure, which is necessary to bring the oil to the surface. so to force the oil up, they're injecting seawater down deep underground. >> we will inject about 84 million of gallon per day of seawater. >> so where is the seawater coming from? 'cause we're here in the middle of a desert. how far away is the sea? >> it is about 150 miles from here. >> so in addition to all of this for the oil, you're also building a pipeline from the-- >> a pipeline to get the additional water all the way to here. >> the complexity and vastness of the project are staggering with 26 contractors, 106 subcontractors, and 22,000 workers from around the world who have laid thousands of miles of pipeline and cables. how much steel are you
using here? 'cause i'm looking. it's just steel as far as i can see. >> see, we have enough structured steel here that will build two bridges equal in size of the golden gate bridges in california. >> two? >> two. >> these two mega projects plus three others are costing saudi arabia a total of $60 billion over five years. and they're not borrowing any of it. it's all being paid for in cash. still, saudi costs for producing oil are the lowest in the world. how much does it cost saudi arabia to produce one barrel of oil? >> [laughs] this is an excellent question. it is very small, very little. it's probably less than $2 to produce a barrel. >> saudi arabia reportedly needs to sell oil for at least $55 a barrel to cover the cost of running the country.
fossil fuels finance 75% of its entire domestic spending budget, but oil has sunk below that break-even price. does this worry you? does this send chills through your spine? >> oh, i am not a worrier. i get concerned, but i don't worry. >> are you concerned? >> the concern is this: any price must be good for the producer, for the consumer, for the investor, the oil companies. >> so you're saying if the price goes too low, then production will fall, and in the end, we'll be squeezed. we won't have enough oil-- >> that's right. >> to run our country. >> price will skyrocket. >> what he wants is an end to the wild swings in price, which is why, to keep the price from further plummeting, he agreed to a cut of 1.5 million barrels a day in the october 2008 meeting of o.p.e.c., the oil cartel. the point is that saudi arabia
wanted the 1.5. this was not something jammed down your throat? >> no, this is--no. by the way, nothing gets jammed down our throats. >> but iran wanted more? >> well, i mean, different countries want different levels, different cuts, but in the final analysis, reason prevails. >> but are you saying that-- >> this is saudi arabia influence on o.p.e.c. >> influence so strong now that he was able to quash iran's attempt to double the price of oil, which tehran needs to support its budget, including its nuclear program and the bankrolling of militias like hezbollah and hamas. still, al-naimi says oil is no longer used as a weapon. iran tries to keep the price way up, and venezuela's trying to keep the price way up. that--you don't consider that oil as a weapon? >> if you looked at these countries you just named...
>> yes. >> every one of them would like to sell every barrel they can. >> at as high a price as they can get away with. >> yes, right. >> the sense out of the o.p.e.c. meeting to a lot of people was, by cutting production, your purpose was to get the price up again, and that would hurt the world, which is suffering an economic crisis. and the world means everywhere. >> i can assure you that price was the least on our mind. i say that in all honesty. >> but the sense is, you were oblivious to the concerns of the world facing this economic crisis, that you didn't care about the recession, the credit problems, or anything like that. >> that is really a very unfair criticism. what did governments do when the financial crisis happened? they took measures to bring
stability back to the financial market. and we see, because of our responsibility, a future crisis in the oil market. should we not take preemptive measures to prevent it? and i think the answer is, yes, we should. it's incumbent on us not to see the oil market destroyed. [ticking] >> coming up, an unprecedented look inside saudi aramco, the largest oil company in the world. >> this is the nerve center. every facility in the kingdom, every drop of oil that comes from the ground is monitored in real time... >> in this room? >> in this room. >> that's ahead when 60 minutes on cnbc returns. [ticking] [ticking]
texaco, exxon, and mobil. saudi arabia bought it out and nationalized it in the 1980s, and today, saudi aramco is the custodian of the country's only source of wealth and power. >> saudi aramco is a massive complex along the persian gulf, hundreds of miles east of the mega projects. over 16,000 people work here at the company's compound, which is like a little country with its own security force, schools, hospitals, even its own airline. abdallah jum'ah is president and ceo of saudi aramco. so this is your headquarters. >> this is our headquarters. >> and how big is aramco? >> saudi aramco is the world's largest oil-producing company. >> and in 2008, it was the richest company in the world, worth some $781 billion. >> this is the heart of our operation. this is the nerve center.
>> it keeps going. look at this. this is gigantic. he gave us a tour of the company's command center where engineers scrutinize and analyze every aspect of the company's operations on a 220-foot digital screen. >> every facility in the kingdom, every drop of oil that comes from the ground is monitored in real time... >> in this room? >> in this room. and we have control of each and every facility, each and every pipeline, each and every valve on the pipeline, and therefore, we know exactly what is happening in the system from "a" to "z." >> what this map shows is all the oil fields in saudi arabia. that big green blob in the middle is ghawar, the largest onshore oil field in the world. and the one on top is safaniya, the largest offshore oil field
in the world. and these green squares are supertankers that are being monitored on the high seas in real time. so there's not anything that goes on with oil--with saudi arabian oil--that isn't known in this room right now? >> absolutely. absolutely. >> how much did this facility cost you? >> a lot of money. >> and what you see today is a company that is as professionally sound as any international oil company. >> before ali al-naimi became oil minister, he ran saudi aramco for 11 years. he was the first saudi president and ceo. you have, as you just said, one of the most efficient, cutting-edge, 21st century companies in the world within one of the most religious conservative countries in the world. it's almost a paradox.
we were surprised by this. >> i don't think there's any real surprise. many people have images of saudi arabia, but they really change their views and images when they come and visit saudi arabia. >> but to western eyes, it is a paradox. skyscrapers, traffic jams, and shopping malls coexist with ancient tribal customs. the king and the koran reign supreme, and women everywhere are required to cover themselves in black from head to toe. even i had to wear the abaya. the rules apply everywhere, it seems, except for the women at saudi aramco. when the u.s. oil companies came here in the '40s and '50s, the americans moved into the area with their families and developed it to suit their tastes and their way of life. they created a replica of american suburbia. today you could be in the
outskirts of houston or los angeles. it's almost like it's an enclave within saudi arabia. it's different from the rest of the country. >> yes, that's true, because-- >> very different. it kept a lot of the american ways. >> yes, of course. >> but blocked off from the rest. >> but they are good ways. there is nothing wrong with-- these were their excellent ways. >> but i was so surprised to see the culture there, because, for instance, i saw men and women working side-by-side. i saw women driving cars there, which you don't see. >> it's not strange. >> not strange to him. he's a product of that culture, having risen through the ranks. he started out as a 12-year-old office boy in 1947 when, it was said, that to get oil, all you needed to do was ladle it out of the sand. [ticking] >> coming up... >> let me be blunt, okay? and ask you to be candid. >> yeah. >> is it aramco's hope to
prevent a switch away from oil? somebody said the country is the oil business. i mean, you absolutely need to do this for your own survival. >> and what's wrong with that? >> saudi arabia preparing for the future when 60 minutes on cnbc continues. [ticking] [ male announcer ] while many automakers are just beginning to dabble with the idea of hybrid technology, it's already engrained in our dna. during the golden opportunity sales event, get great values on some of our newest models. this is the pursuit of perfection. in communities across the country.
whether it's supporting a delaware nonprofit that's providing training and employment opportunities, investing in the revitalization of a neighborhood in the bronx, or providing the financing to help a beloved san diego bakery expand, what's important to communities across the country is important to us. and we're proud to work with all of those who are creating a stronger future for everyone. ♪
beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. [ticking] >> in 2008, saudi aramco was the largest oil producer in the world. according to its ceo abdallah jum'ah, much of its profits gets plowed back into research and development of new oil fields, ensuring the company will remain number one for a long time to come. >> the oil is a gift from god. the recovery of oil is really the work of men, and this is part of it here. >> here in this room, aramco engineers are making sure that not one drop of oil is overlooked. these computers are receiving data via satellite from sensors mounted on drill bits that are burrowing deep into the oil fields all over saudi arabia.
the engineers are sending ims-- instant messages--that actually guide the drill bits. >> he is now directing that drill bit to go into the best areas of the reservoirs and suck that oil from it and not leave any oil behind in our supply. >> so, in other words, this drill bit's like a snake. >> it is. exactly. >> it doesn't go like that. >> no. >> it would go down and then follow where the oil is. >> yes, absolutely. and mind you, this is happening 400 to 500 miles from here geographically, and we are sending that drill bit also two or three miles in the ground. >> jum'ah says with this technology, they're able to recover ten times more oil than before. but global demand is dwindling. even americans, the world's leading gas guzzlers, are buying less. in the last ten months,
americans drove 78 billion fewer miles than they did in the ten months last year-- same ten months. this is quite a dramatic decrease in driving. >> well, to put it in better numbers, i think your consumption dropped by a million barrels. >> is there a thinking that this decrease in demand might be permanent? >> uh, no, no. >> he says the u.s. is saudi arabia's number one customer, and the question is, what will aramco do to keep it that way? one thing is discourage the move toward electric cars by trying to alleviate our concerns about the environment. they showed us their new $4 million experimental combustion engine, which they hope will increase gas mileage while it lowers co2 emissions. >> what we want to see is that there is an emphasis on also
making this oil greener and making the fossil fuels in general greener, because they're gonna be with us for the long haul. >> let me be blunt, okay? and ask you to be candid. is it aramco's hope to prevent a switch away from oil? somebody said the country is the oil business. i mean, you absolutely need to do this for your own survival. >> and what's wrong with that? >> well, i didn't say anything was wrong with it, but it's a fact. you'd admit it's a fact. >> yeah, we admit a fact that, yes, this is--we depend on the oil industry. we want it to help us, you know, to develop our economy and to develop the economy of the world. so what is good for the well-being of saudi arabia should be good for the well-being of the world too. so there's nothing wrong with that. >> and so what do you say to people out there like al gore
and now mr. obama that say we have to devote ourselves-- devote ourselves to reducing our dependence on oil? >> my answer to this is, we have to be realistic. we don't have the alternatives today. if there are alternatives, be my guest and come and bring them in. but they are not there. >> you're saying whatever the world does in terms of wind, nuclear, coal, we're still gonna need oil, and a lot of it, no matter what? >> you're still going to need oil and a lot of it. >> politicians use this all the time that we're "addicted," addicted to foreign oil. and addiction has a dark connotation, because if you're addicted, there's a suggestion that there's a drug dealer who's trying to keep you hooked. it's in the air that you want to keep us hooked. >> there is nothing addictive about oil.
if you look back 100 years, what would the world be without it? >> even president bush, who's an oil man, even he has said we're addicted to this and we have to get off this oil. >> but listen to what the professionals say and what do they advise. it's not gonna happen today. it's not gonna happen ten years from now. it's probably not gonna happen 20 years from now. it's not gonna happen 30 years from now, okay? because you are still gonna be using fossil fuels. >> rather than oil pushers, the saudis see themselves as good global citizens who are trying to save the world from a catastrophic oil shortage. but as oil minister al-naimi told us, the kingdom is hedging its bets. >> we, in saudi arabia, are developing solar energy. >> solar energy. >> yes. >> you're doing research in solar energy? >> yes. where else is the solar energy
the most intense? >> at the desert. >> the desert, of course. >> but won't that hurt your oil industry? >> no. no, no, not at all. it will supplement it. our vision is that we will be exporters of gigawatts of electricity. we will be exporting both: barrels of oil and gigawatts of power. >> and so, he says, the kingdom will still be in the energy business long after the sun sets on the age of oil. >> due to the great recession, oil prices had plummeted when these stories first aired in 2008 and 2009. they're back up again but have not reached the heights of $150 a barrel. as for the possibility of speculators driving prices up, new federal regulations now make it more difficult to manipulate