SHEIKH ZAKI YAMANI INTERVIEW - Tuesday 24th June, 2008
TRANSCRIPT
Earlier this week, oil hit a new record high, at nearly US$140 a
barrel. And if all the panic's starting to remind you of the 70s oil
crisis, you're not alone. One man who's been there and done that where
oil is concerned is Sheikh Zaki Yamani. Saudi Arabia's Oil Minister for
25 years, the Sheikh led OPEC right through that turbulent time.
Viewers among you with long memories will remember how world leaders
waited with bated breath for his every word about the price of oil.
Now, with OPEC, as we speak, under fire again, I caught up with the
Sheikh from his home in the French Alps.
GEORGE NEGUS: Your Excellency, thank you very much for your
time. As we
speak the world is almost hyper-ventilating - it's gone into a spin
over the price of oil, our PM Kevin Rudd has said that it is time to
take a blowtorch - his words - to the OPEC organisation. Do you think
that's really the answer or is he possibly targeting the wrong people?
SHEIKH ZAKI YAMANI, FORMER OPEC SECRETARY GENERAL: Well I
think the
main problem we have is the pricing of oil as it is now. I think it's
wrong. It does not reflect the fundamentals of supply/demand.
GEORGE NEGUS: That's what people are struggling to understand?
Why is
it that at the moment that the price of oil seems to be out of control
and is causing great difficulty for most people in government, in
corporations and privately?
SHEIKH ZAKI YAMANI: Well, a combination of reasons. One of
them -
speculations. So many people, they go into this future market as if
they go to a casino and they gamble. And the people all over the world
must pay the price for what they are doing. This is number one. Number
two - there is definitely a shortage of supply.
GEORGE NEGUS: So what you seem to be saying is that it's a
combination
of problems - there is a shortage of oil - that's true - but also the
speculation in the market place.
SHEIKH ZAKI YAMANI: Yeah well in the market, in this future
market, you
have two kinds of groups. One is the oil companies and the others are
the non-commercials like hedge funds, insurance companies and normal
people. They inject billions of dollars every day in order to make
profits. Sometimes they make it and sometimes they don't and then they
spread some rumours about the possibility of invading Iran and problems
in Nigeria and so on. And so the market is subject to rumours, not
realities. They use any excuse, to push the price upward and they make
money.
GEORGE NEGUS: Is this situation resolvable?
SHEIKH ZAKI YAMANI: When you have enough supply of oil then
probably
this will help. But in my opinion we have to change the pricing system
that we have right now. This is a very wrong system. A small group of
people, they raise the price of oil and the whole world will suffer
from this.
GEORGE NEGUS: So what can be done to rectify that system to
make oil
affordable?
SHEIKH ZAKI YAMANI: Well I think if we can change this system.
As a
matter of fact, we've lived so long with wrong systems. We have to have
a system far away from speculation which reflects the real
supply/demand situation.
GEORGE NEGUS: In reality though, your Excellency, is it
possible to
control something like Wall Street.
SHEIKH ZAKI YAMANI: Well the future market is a major problem.
I said
there are different reasons, different kinds of problems. This is a
major problem in my opinion.
GEORGE NEGUS: Excellency, people like Goldman Sachs are
predicting that
prices could go as high as $200 a barrel. That's a frightening figure.
SHEIKH ZAKI YAMANI: Well, when you are in a casino you can say
anything.
GEORGE NEGUS: So you think that's possible?
SHEIKH ZAKI YAMANI: Well it depends on what will happen. When
you have
a very unstable situation in the Gulf and the expectation that there
will be an attack on Iran and Iran will respond and if they do respond
- it's $200, $300 per barrel, could be the result of that. But this is
a big 'if'.
GEORGE NEGUS: Yes, it certainly is. That would be a worst of
all
scenarios, wouldn't it?
SHEIKH ZAKI YAMANI: One of them, but how about the situation
in Iraq?
In Iraq we don't know what will happen to that country.
GEORGE NEGUS: You in fact predicted that an invasion of Iraq
would
prompt a price of about $100 a barrel. That prediction has certainly
reached reality. Is the war in Iraq partly to blame for the situation
we find ourselves in now?
SHEIKH ZAKI YAMANI: Well, I think the invasion of Iraq was a
major
reason and a major cause of what is happening right now and I don't
know what will happen. Of course, we will have to wait and see who will
be the incoming president in the United States and what will be his
policy, so to speak.
GEORGE NEGUS: There are people in America of course who
believe the
speculators are not really responsible of any significant degree of the
price movement, including people like the US Treasury Secretary Henry
Paulson. So not a lot of people, in America at least, agree with your
explanation for what's gone wrong.
SHEIKH ZAKI YAMANI: Well I don't know whether they believe or
don't
believe. I'm an objective person. I look at this situation objectively.
I don't represent any side. Politics, when it comes, can change your
mind and can make you think of one thing and another.
GEORGE NEGUS: Your Excellency, this weekend in Jeddah, the
Saudis are
hosting a gathering of the world's biggest petroleum producers and
consumers to address this crisis. What if anything can a meeting like
that do?
SHEIKH ZAKI YAMANI: Well I know the oil companies are really
making a
very lucrative amount of profit from the high price of oil. I don't
that they're very keen to reduce the price of oil. The consumers are
those who are the victims so I think that the producers, the
governments, some of them, they're enjoying the high revenue that they
get. They don't know that the price of this high revenue will be
disastrous on them because it's encouraging the alternative sources of
energy which is coming sometime in the future. How soon I don't know,
but when it comes, the age of oil will come to an end.
GEORGE NEGUS: So you don't necessarily disagree with those who
say that
we might be seeing the beginning of the end of the era of oil as a
source of energy?
SHEIKH ZAKI YAMANI: Of course when you have a very high price
of oil -
see what's happening - and every day we hear about a new invention here
and there and they are reducing considerably their consumption of oil.
But the day they use hydrogen for transportation, this is the day that
oil disappears.
GEORGE NEGUS: Your Excellency, you've been in the oil game,
for a
number of decades now. If you were still in the position of authority,
what would your advice be to the people gathering in Jeddah this
weekend? In fact what's your advice generally for how the heck we get
out of this awful bind?
SHEIKH ZAKI YAMANI: Well, I will definitely change the pricing
system
prevailing right now and number two, I will do my best to reduce the
price of oil to expand the life span of oil at least for two decades or
three decades.
GEORGE NEGUS: Your Excellency, we can only hope that somebody
is
listening to your advice and they take it this weekend and in the
future. But thank you very much for talking to us, we appreciate it.
SHEIKH ZAKI YAMANI: Thank you very much. It's a pleasure.
GEORGE NEGUS: Hope you were paying attention, Kevin, and
Brendan, for
that matter. Sheikh Yamani was the guy, by the way, who came up with
that memorable one-liner - 'the Stone Age did not end for lack of
stone, 'and the oil age will end long before the world runs out of
oil'.