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Dr. Ali Bakhtiari, Iranian oil analyst

In the eve of a radical societal change

«The upward trend in the oil price can't be reversed. We could very easily see prices above 60$ a barrel this coming winter. The large majority of global public opinion has not yet realized the critical importance of crude oil - but they all will do after the oil peak.»

Interview by Jorge Nascimento Rodrigues, editor of Gurusonline.tv, October 2004

In the second week of October 2004 when the Brent in London surpass the psychological barrier of 50 dollars a barrel, the Iranian senior expert Ali Bakhtiari was credited as "the man who foresaw in April skyrocketing oil prices at $50-a-barrel by the end of the year". Seven month ago Dr. Bakhtiari prediction was a tremendous risk that could have seen him ridiculed. Although the reality surpassed the prediction - now we can forecast a $60-a-barrel target until the end of the year. Why all this crazy oil horse ride? Dr. Bakhtiari is very clear in his answer: this market dynamic is fuelled by structural causes - the peak oil world production around the corner; according to him by 2006-2007. So, he concluded, we are not leaving in or near another "oil shock", like in the 70's or the 80's, but something different, more profound - "Mankind will enter a new era, a new chapter of its History in which there will not be enough oil for everyone and that is going to change everything, everywhere".

Ali Morteza Samsam Bakhtiari, 58, was born in Tehran, Iran, in 1946, but was educated in Switzerland, where he took a B.Sc. degree in Chemical Engineering at the Swiss Federal Institute of Technology in Zurich in 1968, and a Ph.D. in Chemical Engineering in 1971. Dr. Bakhtiari entered for the National Iranian Oil Company (NIOC) in 1971 for the Research Centre. His career at NIOC has now 33 years, leaving through the imperial period and then the Khomeiny revolution in 1979. From 1972 till 1991 he was part-time lecturer at the Technical Faculty in Tehran University and from 1984 till 1993 he supervised dozens of B.Sc. projects and M.Sc. thesis at the Faculty. In 1999 he took a one-year mission to the Iranian Petroleum Institute and as managing editor of the "Journal of the Iranian Petroleum". He is considered one of the best international senior experts in oil subjects. He wrote a book about Iran's modern history published in London in 1996 titled "Peaks and Troughs".

He has a website at www.samsambakhtiari.com, where he writes a regular column "Insights" and edit a subscribed newsletter named "Letter from Tehran". His preferred motto is: "the future can sometimes be predicted".

He can be contacted by E-mail at: am_samsam@yahoo.com.


INTERVIEW


The price spike is a short-term phenomenon, as analysts and some politicians say, something "reversible" in 2005? Or it's structural and for long-term?

I don't think the present oil price hike (over 50 $/b) is short-term, but rather that it is structural - as 'peak oil' seems to being the main, if not only, driving force. Naturally, during 2005, the markets could witness price volatility (with some momentary downs as investors liquidate their positions), but it doesn't seem the upward trend can be reversed.

Are we entering a new oil shock period, expected since the OPEC March 1999 policy reversal?

The world is not entering a new 'oil shock' period, but it is about to enter a 'new period' altogether. OPEC has nothing to do with this brand new chapter in 'World History'.

«The oil price shocks' are in the past (1973/4, 1979/80), but in case 'peak oil' materialises in 2006-2007 (as I seriously believe), the world will not only be 'shocked' but Mankind will enter a new era.»

With the price per barrel approaching the real prices of the 1980's, isn't this event a "shock"? What's the difference between a new oil shock and a new period?

Let me make it very clear: the oil price shocks' are in the past (1973/4, 1979/80), but in case 'peak oil' materialises in 2006-2007 (as I seriously believe), the world will not only be 'shocked' but Mankind will enter a new era, a new chapter of its History in which there will not be enough oil for everyone and that is going to change everything, everywhere --- in a way that is difficult to imagine.(I am thinking about these changes nowadays).

Do you expect in the short-term (say a semester/one year) a range of 60-80 dollars a barrel for WTI (West Texas Intermediate, the North-American crude traded at New York), a similar price, in real terms, with the oil shock of the 1980's, a range higher than you predicted in last April?

You could very easily see prices above 60 $/b this coming winter, especially if unexpected events come about in the Middle East region. Even a harsh US winter might trigger prices above that target.

«But it now seems that it can take in stride much higher prices than anyone would have thought possible. So, there will be no 'delay' in global economic recovery until further notice ... and much higher oil prices.»

Can we expect a new "delay" in the economic global recovery?

The question of the global economy is very complicated -it looks like even economists are baffled. So far, it has easily accommodated the "dollar forty-ish" oil price range. It seems to be doing the same with the new "fifty-ish" bracket. No one really knows how far it can get on with higher oil prices without plunging into recession. But it now seems that it can take in stride much higher prices than anyone would have thought possible. So, there will be no 'delay' in global economic recovery until further notice ... and much higher oil prices.

OPEC lost control over the market, as Purnomo Yusgiantoro suggested saying recently "there's nothing that OPEC can do about"?

Yes, the OPEC president is absolutely correct saying: "There is nothing that OPEC can do about". The Organization's members are already pumping all out, what else can they do?

Do you think oil export countries and commodity traders entered finally in a "psychological" move understanding that the peak world oil is just around the corner?

The number of people who understand the 'peak oil' phenomenon is very limited. The oil supply certainly didn't peak in year 2000. I don't believe it has peaked yet, my WOCAP model predicted the peak occurring in 2006-2007. I till do think it will be within these two years - which are right around the corner.

Is there a risk of regional warfare conflicts around the "battle" of strategic commodities like oil? Oil has transformed itself in a "geopolitical commodity" extremely sensitive to all kind of events, even if localized or apparently "small"?

Crude oil is by far the most strategic commodity on earth and I doubt there is another comparable commodity. The large majority of global public opinion has not yet realized the critical importance of crude oil - but they all will do after the peak. I simply cannot envision things being settled peacefully.

So, you mean more that "regional" battles?

The Third World War is already underway in most of the Middle East (as shown clearly in daily headlines) and it is bound to overspill sooner or later.

«New explorations (highly recommended) and any new discoveries (to be hoped for) will not have an impact on the imminent 'peak oil'. If discoveries are made, they will come to slow down the gradual decline that will inevitably occur after the peak is reached.»

Do you think the opportunities for discovery of new oil fields and for future exploration in the Caspian Sea, in Atlantic offshore (Brazil, Africa) and in Canada (with heavy oil exploration will be the second in production in 2050), will help to "calm" the peak syndrome?

New explorations (highly recommended) and any new discoveries (to be hoped for) will not have an impact on the imminent 'peak oil'. If discoveries are made, they will come to slow down the gradual decline that will inevitably occur after the peak is reached.

How we can solve the energy demand boom from the big emergent powers, like China and India?

Demand for oil is booming in both China and India. 'Peak oil' is bound to hit these two behemoths much harder than developed countries, which are less vulnerable due to their more mature economic systems. But that is life: these two newcomers on the global economic scene began their development just before the 'peak'. It seems the Chinese are aware of the dangers ahead, but not so much the Indians. However, both countries' reactions to 'peak oil' might prove electric.

«It seems the Chinese are aware of the dangers ahead, but not so much the Indians. However, both countries' reactions to 'peak oil' might prove electric.»

In the long run what's the best strategy for oil producers - the policy followed by Dubai, for instance, an example most acclaimed in the West?

I believe that the oil producing countries have a hundred and one way to use these windfall profits, but the larger part will most probably go to waste - as in the past. I don't think that Dubai is a worthy model: one day all that is bound to return to sand. It might be advisable to allocate part of these added oil revenues on general education and on projects fostering sustainability (not on facade projects).


© Gurusonline.tv, 2004

 
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