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Encore Presentation: We Were Warned: Tomorrow's Oil Crisis
Aired August 12, 2006 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, CNN ANCHOR: Hello I'm Fredricka Whitfield, here's what's happening right now. Hezbollah leader Hassan Nasrallah says he doesn't like parts of the U.N. resolution to end the fighting in Lebanon, but, he says, Hezbollah will go along with it. Lebanon's cabinet is expected to approve the resolution at its meeting today.
Israeli officials say Prime Minister Ehud Olmert will recommend acceptance of the U.N. resolution when the Israeli cabinet meets tomorrow. A top Israeli military official says troops will abide by the cease-fire, but adds, quote, we will retain the right to protect ourselves if attacked, end quote.
As British police continue their probe in to the alleged air line terror plot, a lawyer for two of the suspects is speaking out. In an exclusive interview with CNN attorney Mudassar Arani says here clients are worried about their families.
(BEGIN VIDEO CLIP)
MUDASSAR ARANI, LAWYER FOR TWO SUSPECTS: Well they seem just ordinary people who were very shocked at what was happening to them. They're extremely concerned about their families. Some, obviously, as a result of the raids taking place, the family members have been moved out of their homes, in order for the places to be searched.
(END VIDEO CLIP)
WHITFIELD: And now this breaking information. Reuters is now reporting that the Lebanese cabinet has agreed unanimously to the U.N. resolution to end the fighting between Hezbollah and Israel. As we've been reporting the Israeli cabinet is expected to vote on it tomorrow, and it has already alluded to the fact that they will be agreeing on it. The U.N. resolution was agreed upon unanimously by the 15-member U.N. Security Council last night.
Meantime President Bush and Democrats sparring over the airwaves today, over the terror issue. While Democrats say the Bush administration could do more to protect America, Mr. Bush is defending his policies. Both sides focused on the issue in radio addresses today.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This plot is further evidence that the terrorists we face are sophisticated and constantly changing their tactics. On September the 11th, 2001 they used box cutters to hijack airplanes and kill thousands of innocent people. This time, we believe, they planned to use liquid explosives to blow up planes in mid air.
SEN. MARK PRYOR (D), ARKANSAS: My fellow Democrats and I believe our government must do more to protect Americans at home and around the world. We also understand there is no time to waste. Five years after 9/11 our country is not as safe as it needs to be or should be. More needs to be done.
(END VIDEO CLIP)
WHITFIELD: Coming up at the top of the next hour, more of our exclusive interview with the lawyer for two of the suspects in the alleged terror plot, uncovered in Britain.
I'm Fredricka Whitfield at the CNN Center in Atlanta. "CNN PRESENTS" begins right now.
FRANK SESNO, CNN SPECIAL CORRESPONDENT (voice-over): In Houston, Texas, it is a terrifying time. The streets are deserted. Businesses are closed. Entire neighborhoods are locked and lonely.
Just the day before, gridlock finally gave way to exodus as residents fled, one step ahead of this year's monster storm, Hurricane Steve. No one yet realizes how much it will alter the landscape, starting right here in Houston, headquarters for much of big oil.
The region is home to nearly two dozen major refineries. Together they process about a fourth of all the oil used in America. This is the calm before this storm.
ANDERSON COOPER, CNN ANCHOR: The winds are just constant now. It's like thousands of needles pricking you.
SESNO: Category 5 Hurricane Steve slams ashore with winds of nearly 200 miles an hour. The death toll is modest, but the physical damage is breathtaking.
UNIDENTIFIED MALE: Storage tanks have been tipped over here and torn apart.
SESNO: Especially oil refineries, storage facilities, and hundreds of offshore platforms badly damaged. Experts predict it will be months, years in some cases before refineries are repaired.
Gasoline prices shoot up across the country.
UNIDENTIFIED MALE: We ain't got no gas, food, or nothing!
SESNO: panic-buying leads to long lines and fears of shortages.
UNIDENTIFIED MALE: Many pumps have run dry.
SESNO: Satellite television sends these pictures around the world, watching closely, al Qaeda terrorists, who have been waiting patiently for this moment ever since they saw Hurricane Katrina in 2005. With oil supplies now strained and vulnerable, the terrorists make their move.
September 26th, 2009, it's business as usual in the world's largest oil producer. Saudi Arabia is pumping 10 million barrels a day, much of the kingdom's oil passes through the sprawling Abqaiq processing facility near Ras Tanura.
At 12:45 p.m., air traffic controllers pick up a distress call from a passenger jet flying from Tehran to Riyadh. Before they can even respond, the channel goes quiet. The plane disappears from their screens.
At 1:04 an Arab satellite channel reports massive explosions at Abqaiq. Within minutes there are reports of a second attack on Saudi Arabia's two largest export terminals at Ras Tanura and at Yanbu on the Red Sea.
This looks like al Qaeda's big move, its real encore to 9/11, an attack that shakes the world. Some experts speculate up to 7 million barrels of oil a day, 8 percent of total world consumption, will be disrupted for six months or more. No one really knows.
Oil markets are in chaos. A barrel of crude quickly tops $150. Oil experts predict gasoline will hit $7 a gallon in the U.S., $10 a gallon in Europe. Political and business leaders fear the worst.
(on camera): This program is built around a dramatic scenario, a scenario that could affect every one of us. We can hope it never happens, but it's entirely plausible. In fact, we have put it together with experts who study these very possibilities.
In the hour ahead, we will also journey through the present to look at what we are doing about these very things. You see, we have been warned, warned since the Arab oil embargoes of the 1970s, and Jimmy Carter's call to conserve.
JIMMY CARTER, 39TH PRESIDENT OF THE UNITED STATES: The energy crisis is real.
SESNO (voice-over): Warned again just recently when an oilman president told us...
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: America is addicted to oil.
SESNO: But we consume more than ever, and forecasts show the trend continuing. So can we avoid tomorrow's oil crisis?
I have come out to Maryland farm country to meet someone who used to worry a lot about America for a living.
JAMES WOOLSEY, FMR. CIA DIRECTOR: Hey, Frank, good to see you.
WOOLSEY: Come on in.
SESNO (on camera): So this is home?
WOOLSEY: This is home, it's only about 20 miles outside the Beltway. SESNO (voice-over): James Woolsey dealt with national security matters for 25 years. He was CIA director during Bill Clinton's first term. If there was a threat, chances are he knew about it.
In recent years, Woolsey has been worrying about what would happen to America's way of life if the oil we are addicted to suddenly wasn't there.
WOOLSEY: If you don't worry about oil interruptions, you are living in something of a fool's paradise.
SESNO: Woolsey's concerns have become a way of life. He and his wife Sue own what you might call an energy safe house.
WOOLSEY: You can see up here we have put photovoltaics.
SESNO: He has put solar panels on his roof and a hybrid in his driveway.
(on camera): The famous Woolsey-mobile?
WOOLSEY: Bin Laden hates this car.
SESNO (voice-over): It gets up to 50 miles to the gallon.
(on camera): You have made your stand as a citizen on energy issues, that can't be just pure coincidence?
WOOLSEY: I think our problem really is our reliance on oil.
SESNO (voice-over): It's not just a backyard issue, Woolsey has written extensively and testified before Congress on the dangers to America's oil supplies. What we need, he says, is leadership, conservation, and a genuine commitment to alternative fuels like Ethanol and hybrid technology.
WOOLSEY: A lot of solar panels.
SESNO: For James Woolsey, our addiction to oil is a matter of national security.
WOOLSEY: This is a war and it's an odd kind of one because there hasn't been anything in this country by way of an attack for over four years. And people have gotten to thinking that 9/11 was just some sort of an aberration, it wasn't.
SESNO: Woolsey isn't the only expert raising the alarm, and terrorism isn't the only thing that could send our world into an energy tailspin. In his book "Twilight in the Desert," oil analyst Matthew Simmons argues we are nearing the point when the world will use more oil than it can produce. (on camera): Do you hear a ticking clock?
MATTHEW SIMMONS, OIL ANALYST & AUTHOR, "TWILIGHT IN THE DESERT": I hear a gong. I heard a ticking clock during the 90s.
SESNO: And if we don't act, if something doesn't change?
SIMMONS: Well, our life could get a lot darker fast.
SESNO: What is your worst case scenario?
SIMMONS: My worst case scenario is so bad that you don't want to go there.
SESNO: Tell me?
SIMMONS: We would basically end up having a series of energy wars over who gets oil. And they are wars between you and your neighbor, and they are wars between one town and another, and ultimately one country and another.
SIMMONS: It's just total chaos.
SESNO (voice-over): One day after terrorists hit Saudi oil installations, fires burn out of control. Al Qaeda, in a tape delivered to Arab television, claims responsibility and promises more.
At the White House, the president holds emergency meetings and deploys additional warships to the Persian Gulf to support the Saudis and protect shipping lanes.
UNIDENTIFIED MALE: We got knocked down to the ground, and everybody started running.
SESNO: In Houston, destruction from the hurricane is overwhelming. Damage to refineries is estimated in the billions. World oil markets are gyrating wildly and prices have more than doubled. The world is on edge.
SESNO: The week after a Category 5 hurricane hit Houston's refineries and terrorists hit Saudi oil installations, world energy markets are reeling. In California, some gas stations are charging more than $8 a gallon. The governor calls on residents to cut their driving in half.
The White House announces plans to tap America's Strategic Petroleum Reserve.
UNIDENTIFIED MALE: The House will be in order.
SESNO: Nervous lawmakers want to know if the reserve runs low, where the oil will come from. One hundred and twenty miles off the Louisiana coast, over some of the deepest waters in the Gulf of Mexico, I have come out to the middle of nowhere to see just how far we have got to go to get the energy we need.
After an hour-and-a-half, my destination finally comes into view. The Deep Water Millennium, a drill ship that can bore miles in the sea bed below.
UNIDENTIFIED MALE: This here is what we call 28 (ph)-inch underreamer (ph).
SESNO: Joe Guinn (ph) is a straight-talking Louisiana native. He has been working offshore drilling rigs for 33 years.
(on camera): Is this mud from...
UNIDENTIFIED MALE: That's all (INAUDIBLE).
SESNO: ... 10,000 feet under.
UNIDENTIFIED MALE: Right. That's 11,990 feet.
SESNO (voice-over): Today, he's the man in charge.
(on camera): Now you have got how many guys aboard now?
UNIDENTIFIED MALE: They roughly keep about 140 people on board.
SESNO (voice-over): We walk the length of the ship, top to bottom, and marvel at what it can do.
(on camera): How deep could you drill here?
UNIDENTIFIED MALE: Well, we have got 30,000-foot, I mean, if we want to go 30,000, 33,000-foot, we can drill 33,000.
SESNO: Thirty-three thousand feet. That's six miles, six miles down.
(voice-over): Remotely operated vehicles, or ROVs, reveal what is happening on the sea floor. Global positioning systems and thrusters underneath the ship keep it in place over the wellhead.
Computerized lifts pull pipe 270 feet at a time with nothing more than the flick of a wrist. Today they are down 11,000 feet, two miles below the ship.
UNIDENTIFIED MALE: Twenty years ago, I told them they were full of crap. We weren't going to drill out here in the deeper water. Fortunately they made me a liar.
SESNO: All this part of the great global race just to locate new deposits of oil and natural gas. The Millennium is working in the eastern Gulf of Mexico for Anadarko Petroleum. The ship and crew cost nearly $300,000 a day, each deep water site a huge gamble, hundreds of millions for what could be a dry hole.
UNIDENTIFIED MALE: Right now we plan on getting an additional 2,000 or 3,000 feet... SESNO: In Houston, the drilling strategy is set by exploration manager Stuart Strife (ph), and his team of geologists and engineers.
UNIDENTIFIED MALE: We will penetrate as we drill this well.
SESNO: They pore over maps and charts, deciding where to drill. The stakes couldn't be higher. America now uses nearly 21 million barrels of oil a day, a quarter of total world consumption. It imports nearly 60 percent of it. Domestic production has been falling for 35 years.
The Gulf waters are a bright spot.
UNIDENTIFIED MALE: Well, out here we are looking for what we would call big fields. And we would say a big field is 100 million barrels of oil.
SESNO: That may sound like a lot, but it's small compared to the world's really big fields, which contain billions of barrels. That billion with a "B." But we need every drop we can get, and at today's prices, there is money to be made.
UNIDENTIFIED MALE: And that's what helps us set up that three dimensional...
SESNO: Which is why Anadarko employs GEE Whiz 3D software to peer deep into the planet.
(on camera): You are literally touring inside the Earth here?
UNIDENTIFIED MALE: Yes, absolutely.
SESNO (voice-over): Anadarko's John Stevenson (ph) shows me a new way they are looking at the underwater geology.
UNIDENTIFIED MALE: When you are in this room, you really are feeling like you are in the data.
SESNO (on camera): I feel like I'm under water.
UNIDENTIFIED MALE: And you are.
SESNO: Is there a lot of oil and gas down there?
UNIDENTIFIED MALE: Right here we don't know. The truth of the matter is it's going to get harder and harder to find it. There should be, there should be.
SESNO (voice-over): The only way to know for sure is to drill.
(on camera): How long is it taking you to drill where you are now? UNIDENTIFIED MALE: Well, usually around about two weeks we can drill a well. SESNO (voice-over): This site will soon be producing natural gas from a platform very much like this one, the Marco Polo. All together these deep waters account for nearly 18 percent of domestic oil production. It helps, but it won't be our salvation, says oil analyst Matthew Simmons.
SIMMONS: The production profile of each field goes like this. So they come on-stream and they basically peak in about 12 to 18 months and five years later they are down to 20 percent.
SESNO (on camera): And they are quick hits.
SESNO: And we don't need quick hits.
SIMMONS: No, no, no.
SESNO (voice-over): Or do we?
JIM HACKETT, CHMN., PRES. & CEO, ANADARKO PETROLEUM: Well, the clock is ticking on America's competitiveness.
SESNO (on camera): How much can this produce?
(voice-over): Anadarko's CEO, Jim Hackett, believes it is critical that we open more of these waters to exploration.
HACKETT: You know, I agree with those that say that you can't drill your way to independence on energy. What I do think we can do though is impact the price we pay for that by developing our own resources to the maximum extent possible. There is a lot of oil and gas available in the world, but it's not easy to get at anymore.
SESNO: And that's why our quest takes us to the edges of the Earth, from the deep waters to the deep freeze. But can it do more than buy us some time?
SESNO: Fort McMurray, Alberta, lies in the frigid remoteness of northern Canada.
(on camera): Big piece of land.
(voice-over): But it is quickly moving front and center on the world energy stage.
(on camera): These trucks are coming virtually all the time.
UNIDENTIFIED MALE: Yes.
SESNO (voice-over): It has been put on the map by these oil sands, 58,000 square miles of them, 174 billion barrels worth of recoverable oil, giving Canada, America's quiet neighbor to the north, the second-largest oil reserves in the world, right behind Saudi Arabia.
No pump jacks here, though, this is a mining operation, an enormous open pit whose deep, dark deposits are literally pay dirt.
CHARLES RUIGROK, CEO, SYNCRUDE: And we take that oil sand and add warm water to it, and extract from it this very, very heavy oil.
SESNO: They turn that into high quality synthetic crude, explains Charles Ruigrok. He is CEO of Syncrude, the largest producer in the region.
RUIGROK: At the end of the day, this is what we are in business for, right? We want to end up with this stuff.
SESNO (on camera): This is selling for how much a barrel?
RUIGROK: We are at $60 a barrel right now.
SESNO: That's the money-maker.
RUIGROK: We produce 250,000 barrels a day of that stuff.
SESNO (voice-over): That means moving about 1 million tons of earth every day. Nova Scotia Bob McGregor (ph) came to Fort McMurray three decades ago. He never left.
(on camera): Which is the surge (ph) file (ph)?
UNIDENTIFIED MALE: Surge (ph) file (ph) is over by that Century 21.
SESNO (voice-over): McGregor knows every detail of this mine. No backyard sandbox, but a massive hole in the ground, which will only add to Canada's position as America's leading supplier of oil.
UNIDENTIFIED MALE: That just turns into a milkshake of sand and oil, in the pipeline, into the plant.
SESNO (on camera): Basically it's three scoops and you are out, right?
UNIDENTIFIED MALE: Pretty much, yes.
SESNO (voice-over): We are dwarfed by these gigantic trucks, the biggest in the world. They haul 400 tons at a time. The tires alone cost $40,000 each.
(on camera): Listen, I will tell you, if I had Tonka trucks like these when I was a little kid, my life might have taken a whole different course.
UNIDENTIFIED MALE: Yes, that's for sure.
SESNO (voice-over): And it never stops. The operation churns 24-7. It's an industry in overdrive, in 10 years production is expected to triple to 3 million barrels a day. The problem is world demand is expected to increase by 20 million barrels a day.
So in the event of a crisis, this is not the place to look.
(on camera): As impressive as this is, if there were a revolution in Saudi Arabia, for example, Canada can't bail out the world.
RUIGROK: Canada could not bail out the world with oil sands production. At the same time, the oil sands production in Canada is critical to the long-term future of energy supply in North America.
SESNO (voice-over): There may be 100 years of oil here, but that big market just south of the border, the United States, may find that location isn't everything, that Canada has its own interests. A proposed pipeline could take these resources to Canada's west coast for export elsewhere.
Among the pipeline's backers, the People's Republic of China, anxious to get access to all the oil it can as fast as it can.
Two weeks after the attack on Saudi oil and the hurricane that destroyed many of Houston's refineries, there is still no definitive word on when oil production will return to normal.
The world's stock markets are down close to 20 percent. America's big retail stores are largely empty, truckers are simply not driving.
China and Iran announce a deal, Iranian oil in exchange for more Chinese nuclear technology. Both countries insist it is for peaceful purposes. The seeds for this were sown years ago.
China, with its 1.3 billion people and beast of an economy is shopping the world for oil. It is now the world's second-largest consumer of oil behind the U.S. And its aspirations are as big as its population.
Lee (ph) and Jong (ph) are a tiny but telling slice of that. The young couple live in a modest studio apartment in Beijing. They both work, and they themselves as the future.
UNIDENTIFIED FEMALE (through translator): We saw people around us getting richer. So we feel the things that people have in other countries, we can have them too.
SESNO: To begin with, they want a car. Only about one household in 70 has one in China. And while a car costs more than what Jong and Lee earn combined, they are luck because Jong's family has offered to chip in.
UNIDENTIFIED FEMALE (through translator): I'm really excited. I'm really looking forward to the moment of taking the picture of the car license. SESNO: Today, they get their piece of China's boom, the first in their families with their own wheels. It's a 10- hour ordeal, an inspection, paperwork, the keys, and finally, the license plate with an "8," a lucky number in China. It means, "to get rich."
Repeat Lee and Jong's story maybe 75 million times over the next 15 years, and you get a picture of China's energy-intensive economic explosion. See it here too, on China's highways, jammed with trucks. They consumer more than half the country's fuel.
China may be forced into a more energy efficient future, but its oil imports are projected to double in just 10 years. So to fill its tanks, China has been striking deals where ever it can, with Canada, in volatile places like Venezuela, and Nigeria, with rogue regimes like Sudan and Iran, but principally with oil-rich countries in the Middle East, Saudi Arabia first among them.
Saudi Arabia is still the world's oil superpower, producing nearly 10 million barrels a day. It has promised to increase production to keep up with global demand, but Matthew Simmons' research leads him to believe the Saudis won't be able to deliver.
SIMMONS: We have been living in -- on an illusion for half a century.
SESNO (on camera): What's the illusion?
SIMMONS: That the Middle East had unlimited amounts of oil.
SESNO: What is the reality?
SIMMONS: The reality is, is there is twilight in the unlimited amounts of oil. We are probably right on top of the highest oil that will ever come out of the Middle East.
SESNO (voice-over): The state oil company, Saudi Aramco, says there is plenty of oil in the ground.
ABDALLAH S. JUM'AH, PRES. & CEO, SAUDI ARAMCO: There is no one, I believe, with all due respect to my friends in the oil industry, who is able to bring large increments if needed by the world economy cheaper or faster than we are.
SESNO: But for the Saudis, oil and everything about it is a state secret. No one really knows how much they have.
For China, for people like Lee and Jong, for the world, it's an enormous gamble.
SIMMONS: What we should be doing is helping China figure out how they basically create a society beyond oil.
SESNO (on camera): They are not building a society beyond oil, they are building a society on oil.
SIMMONS: Copied after us.
(COMMERCIAL BREAK) WHITFIELD: Hello I'm Fredricka Whitfield in Atlanta. Just when there was hope that the Lebanese cabinet had agreed to the U.N. cease- fire agreement in the Middle East, now another hurdle. Our Brent Sadler is in Beirut and at the root of this hurdle, Brent, is Hezbollah saying it will not disarm.
BRENT SADLER, CNN CORRESPONDENT: That's right. Let me give you a clearer picture, if I may Fredricka. A short time ago the Lebanese cabinet came out with a very important statement saying that they unanimously agree to acceptance of that Security Council resolution, 1701. That's supposed to stop the fighting, at least the heavy offensive action by both sides. But according to a senior cabinet minister, the two members of Hezbollah, who are part of that cabinet, shocked and startled those inside that cabinet meeting by giving official notification that Hezbollah refuses to disarm, no matter what, south of the Litani River.
Now the Litani River is a crucial demarcation line in the south of the country. That's the river, the line in the south, where the Israeli forces are now pushing very hard to take control of as much of that Litani River line as they can before an expected cessation of hostilities early local time on Monday. But now, effectively, we have to faces of the Lebanese cabinet.
On the one hand, publicly the government saying it accepts, but behind close doors, what seems to be a very serious split that could jeopardize the deal to a very great extent if Hezbollah refuses to disarm, no matter what, from south of Litani. A short time ago we heard from Fouad Siniora, who is still putting on the appearance that all was well behind those cabinet doors and that there was an expectation that things would work out for the better come Monday's expectation of a cessation of hostilities. Let's listen to Siniora.
(BEGIN VIDEO CLIP)
FOUAD SINIORA, LEBANESE PRIME MINISTER: It is according to the understanding that we had throughout the discussion, and together with Secretary Rice and with the others, that all offensive operations are prohibited. In other words, anything that has to do with air raids, air reconnaissance, gun boats shooting and advances on the ground, launching rockets, this is all banned. It's not acceptable.
(END VIDEO CLIP)
SADLER: So after a very tense cabinet meeting, there's going to be a 24-hour period when the cabinet will meet again in the hope that Hezbollah will reconsider its position after that alert of the cabinet, to the cabinet rather, that they would not disarm south of the Litani. Important developing news here, Fredricka.
WHITFIELD: Important indeed Brent and now potentially further jeopardizing matters, CNN is learning that Hezbollah is claiming that it has shot down an Israeli helicopter. The Israeli Defense Forces, however, are not confirming that that shoot down has taken place in southern Lebanon and while we try to get the IDF to confirm that Brent, I want to continue my discussion with you and ask you, when you had talked to, oh sorry, we have lost Brent Sadler, well that's the latest information that we do have. What Brent is reporting, that Hezbollah saying that they will not disarm, even though they have agreed, with its two ministers on board the Lebanese cabinet, they have agreed to the U.N. resolution.
Certainly the fact that they are not going to disarm potentially jeopardizes this agreement from the Lebanese side. Meantime Hezbollah is now claiming that it has shot down an Israeli helicopter in southern Lebanon. We're waiting for confirmation coming from the IDF. We're going to continue to work all of our sources at the top of the hour. We will have more information on these stories and others on "CNN LIVE SATURDAY." In the meantime, we want to go back now to CNN PRESENTS.
SESNO: ... past five years, and could do even more if political and environmental obstacles were removed, says industry economist John Felmy (ph).
UNIDENTIFIED MALE: The fact of the matter is we could drill our way into oil independence. There are over 100 billion barrels of oil that we believe have not been found in the United States. But we are not allowed to go for it.
SESNO: Back at that BP solar plant, I'm struck by John Browne's careful balancing act: defending big oil...
BROWNE: There is plenty of oil and plenty of gas in the world, there is no crisis, there is no impending doom.
SESNO: ... even as he says government and industry should be far more aggressive on alternatives like BP.
BROWNE: So we are going to invest about $8 billion in this business over 10 years.
SESNO (on camera): Eight billion?
BROWNE: Eight billion over 10 years.
SESNO: It's a big step, but still a fraction of what BP sinks into its main business every year.
BROWNE: We are investing $15 billion in the oil and gas business because it is up and running.
SESNO: So alternatives are still a drop in the bucket.
BROWNE: At the moment, of course they are.
SESNO (voice-over): So BP is not "Beyond Petroleum" yet. And Browne knows how fragile the supply chain is. An explosion at BP's Texas City refinery in March 2005 sent gasoline in the U.S. to what were then record prices. And that was just one refinery, producing only 3 percent of the gasoline used in the United States. (COMMERCIAL BREAK)
SESNO: The great energy crisis of 2009 is now five weeks old. In the U.S., the postal service furloughs workers and suspends Saturday deliveries. Around the world, manufacturers are shutting down. Several developing countries, facing unrest, issue urgent appeals for aid. Few had planned for this.
This place has a rhythm all its own. But what brings me to Brazil is this, sugarcane, mile after mile of it. They make sugar with it, of course, but also something that makes Brazil a world leader, sugarcane ethanol, clean-burning, high octane.
Ethanol now accounts for nearly 40 percent of Brazil's transportation fuel. In a dangerous world, this stuff is sweet in more ways than one.
(on camera): Eduardo (ph), this stuff goes on forever.
UNIDENTIFIED MALE: Yes, it's a green ocean. It's only sugarcane.
SESNO (voice-over): I meet Eduardo Gunciera (ph) in the fields near his mill, four hours north of Sao Paulo. It's one of the largest operations in the region.
UNIDENTIFIED MALE: They unload the sugarcane here, and with this sugarcane they produce sugar and ethanol.
SESNO (on camera): You can smell the sugar, smell the molasses.
UNIDENTIFIED MALE: Smells very good.
SESNO (voice-over): Here nothing is wasted. The fiber from the cane is burned, which generates enough power for the entire mill.
(on camera): This is renewable energy in the real sense.
UNIDENTIFIED MALE: Renewable energy in the real sense. And we are able to produce the Ethanol that's enough to fuel about 11,000 or more cars per day.
SESNO: Eleven thousand cars a day of ethanol...
UNIDENTIFIED MALE: Yes.
SESNO: ... from these tanks...
UNIDENTIFIED MALE: Exactly.
SESNO: ... day after day.
UNIDENTIFIED MALE: Day after day.
SESNO (voice-over): Brazil is experiencing a sugar boom, 300 mills produce 4 billion gallons of ethanol in 2005, 51 new mills are under construction. And they will need 130 more in the next seven years, why?
Because ethanol in Brazil is not an experiment, it's a way of life. You see it at just about every gas station. "Alcool" they call it, and it's a lot cheaper than gasoline, though it doesn't deliver quite the mileage. Here even regular gas contains 25 percent ethanol.
Brazil's ethanol program has its roots in the 1970s oil shocks. Jose Goldenberg (ph), one of the early ethanol promoters, remembers how the crisis nearly brought his country to its knees.
UNIDENTIFIED MALE: The Brazilian economy was coming to a halt because you couldn't get fuel.
SESNO: In 1975, Brazil's government, a military government, decreed a national ethanol program, pouring billions into it. But the big breakthrough didn't come for nearly 30 years. Flex fuel cars, introduced only in 2003, can run interchangeably on pure ethanol, or a gas-ethanol mix.
An inexpensive sensor analyzes the fuel and instantly adjusts the engine. Three-quarters of all new cars now sold in Brazil are flex.
Brazilians say the ethanol they make, together with the oil they pump, are about to make Brazil energy independent. They won't need oil imports.
(on camera): If there is a disruption in the Middle East, life will go on here as normal.
UNIDENTIFIED MALE: Exactly, exactly. And that was very clear in 1975. That's the reason why we supported the ethanol program strongly.
SESNO (voice-over): Ethanol helped Brazil beat its oil addiction, and with sales and exports growing, its profitable, no more government money.
UNIDENTIFIED MALE: I think that we have won. A good scientific idea was adopted by a large country in the world.
SESNO (on camera): I'm driving a Chevrolet in the middle of Brazil on ethanol, pure ethanol, not a drop of oil, imported oil in this tank. And here is the stuff grown all around us that is the fuel.
So I'm thinking, why can't I do this in America?
(voice-over): So I went to Detroit to find out. I meet General Motors' vice chairman for product development, Bob Lutz, a straight- talking former Marine who spent 40 years in the car business.
(on camera): What's wrong with this? I mean, if -- Brazil is going to declare energy independence they say next year or sooner?
ROBERT LUTZ, VICE CHMN. FOR PRODUCT DEVELOPMENT, GENERAL MOTORS: Yes. There is nothing wrong with it. There is nothing wrong with it. We support it fully. We think running the national on E-85 makes more sense than all the hybrids in the world.
SESNO: Why aren't we doing it?
LUTZ: Well, it's -- right now distribution is very limited.
SESNO (voice-over): E-85, 85 percent corn ethanol, 15 percent gasoline, is made in America. But outside the Midwest it's not widely available and represents just 3 percent of the fuel we burn. The federal government has moved to double that. And GM is selling flex fuel cars.
UNIDENTIFIED MALE: And here it is, the E-85 compatible 2007 Chevrolet Avalanche. SESNO: About 10 percent of its sales in 2005...
UNIDENTIFIED MALE: What if we could live green by going yellow?
SESNO: ... now they are even starting to market them.
UNIDENTIFIED FEMALE: And one car company will lead us there.
SESNO: But the reason the U.S. doesn't have a big alternative energy market, oil has been cheap for so long, even now Americans practically consider it a birthright.
LUTZ: The only way to get people to save on a scarce resource is to raise the price of that resource. And as long as there is a heavy demand on the part of the American public for full-sized sport utilities, we will supply them.
SESNO: And they do, insisting they make sense. Transportation expert Daniel Sperling (ph) says Detroit has lost a lot of time.
UNIDENTIFIED MALE: The automotive engineers have done a great of making the engine more efficient, but all of that efficiency improvement was used to make the vehicles bigger and more powerful. In fact, today's vehicles, on average, have the same fuel economy as 20 years ago. So what we have done as a society is we have said, oil is not a problem.
SESNO: But now maybe oil is a problem. SUV sales have tanked, so what would happen to GM and other U.S. automakers if oil were to get really expensive, say $100 a barrel or more?
LUTZ: That would basically bring the industry to a halt, extremely expensive energy is going to impact every facet of American life.
SESNO: Back in Maryland farm country, far from the oil sands of Canada, the deep waters of the Gulf, the aspirations of the Chinese people, here there is a barely a hint of the precarious balance between supply and demand, only the odd hybrid suggesting an alternative.
This one belongs to the man with whom we started this journey, the former CIA director, James Woolsey.
WOOLSEY: Whether it's a terrorist attack or...
SESNO: We need to mobilize for war, he tells me, that's how serious it is.
WOOLSEY: We have got to be more resilient than we are now, or we suffer the danger of some sort of a knock-out or near knock-out, it's time now to get going.
REP. DENNIS HASTERT (R-IL), SPEAKER: The president of the United States.
SESNO: Late in his term, President Bush acknowledged the need to move beyond oil.
BUSH: By applying the talent and technology of America, this country can dramatically improve our environment, move beyond a petroleum-based economy, and make our dependence on Middle Eastern oil a thing of the past.
SESNO: The talent and technology is out there.
UNIDENTIFIED MALE: Let's go look at the future.
SESNO: In Detroit, Larry Burns (ph) leads the General Motors team, trying to put a hydrogen car on the road. GM's billion-dollar bet could finally replace the internal combustion engine.
UNIDENTIFIED MALE: This will be the world's first fuel-cell vehicle with a 300-mile range. It will accelerate from 0 to 60 miles per hour in less than 10 seconds.
SESNO: Pollution-free technology, but years, probably decades before these cars are king of the road.
Other technologies are within closer reach, like making fuel from hay and other agricultural waste. Though you still have to go to Canada to see cellulose ethanol, as it's called, Iogen, the company that makes it, says the U.S. could one day replace up to half the gasoline it consumes.
President Bush has talked this one up and put some new research money into it. He has also plugged the plug-in hybrid. It has an extra battery, which charge overnight, in addition to its hybrid technology. Make it a flex fuel car so it also burns ethanol, and you could get perhaps hundreds of miles to the gallon, or use no gasoline at all.
But for now...
BUSH: America is addicted to oil.
SESNO: ... Bush's say his initiative comes up short because it is late, under-funded, and fails to mandate significant improvements in fuel economy standards. The new technologies will take billions to develop, years to make a difference.
Meantime the clock is ticking and many of the hard decisions are still being debated and deferred. So we are still stuck with our addiction to oil. And we are lot more vulnerable than we really want to think about.
Terrorism and natural disaster have disrupted much more than just the flow of oil. As winter looms, there are spot shortages of home heating oil and natural gas in America's Northeast and upper Midwest, prices have nearly tripled.
World leaders are now preoccupied with the impact of global recession. The president of the United States signs the Emergency Energy Reconstruction and Freedom Act, mandating conservation, throwing billions at new technologies.
This Thanksgiving, America will be staying home. From California's freeways to the New Jersey Turnpike, it is oddly quiet. Things we took for granted are endangered, and we were warned.
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