March 24th, 2015

Speakers

Chairman and CEO, BP Capital

Description 

You might not expect a billionaire to pick up hitchhikers on his plane, but T. Boone Pickens is no ordinary billionaire. The CEO of BP Capital, who made his first billion in the oil business, recently visited the Commonwealth Club for a discussion on the future of the oil industry.  

But first, he had a story to share, one that belies his humble Oklahoma roots. The last time he visited the Commonwealth Club, he remembered, he issued a blanket invitation for anyone in the audience to join him on his plane. Ordinarily his offer has no takers. “You aren't going to find one or two people to go to Amarillo, Texas,” he laughed, “But then this guy raised his hand.”  Turns out, it was the son of an acquaintance of Pickens’ whose mother in Amarillo was ill. “I said, "Yeah, come on. Jump in."  

At age 68, Pickens left the company he founded, Mesa Petroleum, and has since devoted his time to a crusade to reduce U.S. dependence on foreign oil.  His “Pickens Plan” advocates for natural gas production and the development of renewable energy sources -- including wind power, an industry in which he’s invested millions of dollars.

Over the past ten years Pickens has become known for his uncanny forecasts on the price of oil, leading CNBC to dub him “the Oracle of Oil.”  But at The Commonwealth Club, he revealed the secret to his prescience: "That guy that works for the Saudis, Naimi," he said, referring to their oil minister, Ali Al-Naimi. "I watch what he says, and two weeks later I say the same thing he did."  

Recently he’s gone on record saying that oil prices will climb again, reaching $70 a barrel by the end of this year.  In response to a question from the audience, he predicted that prices would reach $100 a barrel by the end of 2016.  

In his years in the oil business, Pickens has seen a lot of ups and downs.  The current down cycle, he notes, is different from what happened in the 1980’s in one significant way. “This time, the United States is the one that overproduced,” as opposed to the Saudis, “which is incredible.”  Saudi control of the oil market, says Pickens, is a thing of the past. “The cartel is not a cartel any longer.  OPEC is a trade association, is what it is.”

And the U.S. has the resources to stay on top of the market. “Every place but here has peaked,” Pickens continues.  “There are no additions from any other countries except Iraq…if you go back and look at the last five years, you've increased demand by seven million barrels a day and the United States has provided five of that.  So the rest of the world is pretty well peaked.”  

One reason? Oil production in the U.S. has benefited from new extraction techniques, such as fracking and horizontal drilling, that allow for greater production from shale oil fields.

“You have to assume that if you have oil fields, you have source rock,” explained Pickens, who majored in geology at Oklahoma A&M.  “Meaning, that's where the oil and gas were formed.  And due to heat and pressure, they were squeezed out and into what we call conventional reservoirs - sandstones, limestones and dolomites.  

“We’ve found all the big ones in those conventional reservoirs,” he went on, “and we pretty well have in the United States.  But then we showed up with all this shale.”

Despite public opposition to fracking in the state, Pickens believes it’s only a matter of time before California’s Monterey Shale is plundered for its oil – and its profits. “Because those landowners, they will start suing,” he predicts. “If they have a farm or a ranch, the acreage there, if it has Monterey shale under it, it will be productive, and they'll want income from it.”

Unlike many in the oil business, Pickens has come out publicly on the dangers of climate change.  “I’m a believer in global warming,” he says at the beginning of his 2012 TED Talk, in which he advocates for a switch to reliance on natural gas over oil.

At the Commonwealth Club, Pickens confirmed his stance. “Yes, we have done some things to the atmosphere,” he told host Greg Dalton.  “We've had a lot of emissions out of these vehicles and everything else.”

“We shouldn't wait until it's confirmed that we messed it up,” added Pickens, eliciting spontaneous applause from the audience. “Go ahead and start doing something. “

But when pressed by an audience member, the former oil tycoon admitted he’s not ready to close the book on fossil fuels – not just yet.

“Let's just say that, yes, we start to prepare for climate issues and everything else…I'm ready to do that.  But you will decline and deplete on the oil and natural gas.  You're going to have to go to some other form of transportation fuel or whatever in time.  

“I would move in that direction.  I want to do that,” Pickens continued. “But listen, I'm a patriotic American, I want American fuel.  I don't want OPEC oil.  The battery, the wind, the solar -- all of it, anything American is what I want. But it just so happens, you're stuck with fossil fuel right now.”

 

Related Links:

TED Talk: “Let’s transform energy – with natural gas”

CNBC: Pickens predicts oil will return to $70 or $80 a barrel

 

- Anny Celsi
March 24, 2015
The Commonwealth Club of California
Photos by Ed Ritger