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Good evening, I'd like to welcome everybody to this event tonight, the opening plenary of the Energy Futures Track of the Aspen Idea Festival. My name is Russell Yarrow. I'm Manager of Public Affairs at Chevron and we're delighted to be a sponsor for this event for the second year in a row. It is the kind of event that really aligns with our philosophy, which is that no matter how big the challenge, if you get a smart idea, and smart people around a table, who are engaged, you can make things happen and solve great problems and great issues. I stepped out for a couple of minutes this afternoon to buy my water. I walked down the street downtown to Carl's Pharmacy and I had my FIJI water on the counter, and, as I was checking out, the woman behind the register looked at me. She said, 'Water will become the new oil.' And I thought, 'My gosh, the Aspen Ideas Festival is starting right now in Carl's Pharmacy.' And then I got into a car to come over and my partner in the car riding over with -- I hadn't had him before, but his name is Carl, I don't know if you are here tonight Carl -- but he is going to lead a session later this week on water issues. And so we started talking about oil and water and against all conventional wisdom, there are a lot of commonalities to oil and water. And I thought that's really the spirit of this event, which is to bring people together and talk about ideas and understand how those ideas share things in common and are integrated. So, again we are delighted to sponsor this event and I'll hand it over to my colleague Elizabeth Keefer from the Atlantic to introduce our speakers. Thank you. Thank you, Russ. And on behalf of the Atlantic and the Aspen Institute, I want to thank Chevron for their partnership this second year here. They were with us last year sponsoring the Energy Futures Track and we went back to them and said, 'Will you join us again?' and they said, 'Yes.' So we're happy to be here tonight, and I have the great pleasure of introducing Peter Robertson who is Vice Chair of the Board of Chevron Cooperation. It was interesting to read his bio because he grew up at Chevron. Therein after some three dozen years --a Scotsman as you'll hear, educated at the University of Edinburgh, and then did his MBA at Wharton, and has been in the States for most of his career, and has run virtually everything that one could run at Chevron. At one point, he was actually running worldwide exploration production in the global gas business and said there probably is not that much else to the Company. In his current job, he has in his portfolio, HR Policy, Government and Public Affairs, Strategic Planning, and Corporate Compliance. He is President of -- sorry -- chairs the U.S. Energy Association; and in a few of his other postings at Chevron, he has been President of the Chevron Overseas Petroleum, President of Chevron, U.S.A., and President of Warren Petroleum Company, which is the former natural gas liquids subsidiary of Chevron. So, a long and distinguish career and he is joining us on en-route to --- Indonesia. He said Aspen is on the way to Indonesia. Yes. So he is going to enjoy a good night --a good night's sleep tonight in Aspen and then be on a plane all of tomorrow night. So Thank you Peter for being here. And we have interviewing him the distinguished Jim Lehrer. And I said to Jim, I've read your bio today for the first time; I didn't realize you were so prolific. This man has written 16 novels, has his 17th on the way this fall. The 17th will be Eureka, the latest, to give you a little commercial --The Phony Marine, which was published last November. He's also written two memoirs and three plays. But you probably know him better for The NewsHour with Jim Lehrer, where he is anchor and executive editor at the PBS long-running show. He came to Washington 35 years ago and quickly made his mark. He first teamed with Robert MacNeil in 1973 when they were covering the Senate Watergate hearings. And then in 1975 began what turned into The MacNeil-Lehrer Report and eventually, as of '83, was called The MacNeil-Lehrer NewsHour. It was the first 60-minute evening news program on TV, and in 1995 with Robert McNeil's retirement, the program became The NewsHour with Jim Lehrer, which is what we know now. He has numerous awards and honors and, in fact, in the past 5 presidential cycles, he has moderated 10 of the nationally televised presidential debates. And he has also won this distinguished Presidential National Humanities Medal in 1999. So we're in good hands with Jim Lehrer. Thank you very much for joining us. Thank you very much. The other thing you need to know in the interest of transparency about the great big ideas of Chevron and in addition to underwriting this event, and this festival they also underwrite a television news program, one of the main underwriters of a television program on PBS called the The NewsHour with Jim Lehrer -- in the interest of transparency. And that's another great big idea, that's a really And speaking of big ideas, and Einstein, which clearly we have been doing since this began today; Einstein had another big idea besides the one that Walter wrote so much about, he gave it very short strips in his book. But in 1901, Albert Einstein was walking down a dirt road in South Texas, between Beaumont and Port Arthur, in that general area, and he felt something moving under the ground off to the left. He was with a friend; he walked over and said, ÃƒÆ’Ã†â€™'Dig a hole in that ground.ÃƒÆ’Ã†â€™" And this big huge geyser of black stuff spewed forth, they called it "oil," and that's what brings us here today. There you go, Spindletop. If you believe that, you believe anything -- yeah, Spindletop absolutely, Spindletop.You believe that, you believe anything. Peter? The -- speaking of big ideas, good or bad, the Energy Bill just passed the Senate, its about to go to the House and one of the underpinning ideas of that Bill is that gas mileage must be increased. And in this legislation, it's 35 miles a gallon. Is that a good idea from your point of view? Well, I think from my -- first of all let me say, this is a real honor to be interviewed by Jim Lehrer. This is really something, so, I'm in awe of that. Of course it's a good -- I mean, I think the -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥energy efficiency is a good idea, and I've got no doubt in my mind that we need to and can become a whole lot more energy efficient in the United States. So I think energy efficiency in autos is really important. I think energy efficiency in buildings --and you know, I was just hearing a little bit about this building, how little energy this building uses --energy efficiency in everything we do. And, you know, in our Company, for instance, in the last 15 years, our Company is now 27 percent more energy efficient. We've been focusing on energy efficiency. We use 27 percent less energy today than we did 15 years ago. Meaning your own? In our own Company. Jut the way we run our facilities, which is worth about 2 billion dollars a year in operating expense. So, I mean there are huge opportunities out there for everybody to get more energy efficient; and I think more energy efficient cars are a good idea. Whether 35 miles per gallon is right number, I don't know; but I do think that energy -- more energy efficient cars has been demonstrated round the world. I think we can do it. And need to do it. -- the reason I asked, is because we had a representative from the oil industry on our program the day that was passed and she said this is not a good idea. The oil and gas -- American Petroleum Institute. --which is the trade organization -- as you know of the oil industry, and she said the problem is that if you increase gas mileage you'll increase driving and you'll increase the amount of gasoline that is burned. Well, I mean, you know you're going to make up all kinds of arguments. I just think that if you look around the world and see what people are doing and how they're driving cars and how they get much better mileage, you know, maybe its because I'm from Scotland, but I think we can do better than we're doing right now. And I think technology can frankly give us a driving experience, that's still a very, very fine driving experience with a lot less energy. So, I guess I'm in support of a broad-based effort at increasing energy efficiency. I don't think it should be limited to autos, and in this Bill that you're talking about -- there is a lot of other energy efficiency items that I think collectively are all, you know, an important step forward. We need to become more energy efficient, and I think government has had -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥can have an impact on that. I come from California now, and the government in California has had a big impact on energy efficiency over the years, and I was just in fact checking this afternoon; I think California is the second most energy efficient state in the United States and more energy efficient than Europe, and slightly less energy efficient than Japan; but way, way more energy efficient than the United States. So government can have an impact, standards are -- can be good things, appliances, buildings, cars, I think it's --I think we really need to work on that. It's an important source of energy. An important source of energy. Put it on the list. Well, then in sort of a roundabout way, a source of energy. Sure. Absolutely, absolutely, because of what is not used. We'll put it on the list, the big picture, about if we are going to 'solve' the energy problem that we have not only in this country, but in this world, where does efficiency come? What are the big --we're talking big ideas here? What are the big solutions? Well, I mean, first of all, you know, I think that in the next 25 years we expect the demand for energy in the world to grow by 50 percent Increase by 50 percent from where we are today. And that's -- All kinds of energy. I mean coal, nuclear, whatever; but all kinds of energy. And that factors in some energy efficiency around the world. So there is a huge increase coming. So we need to, we need a- Let me stop you there. This is inevitable just because of the -- the developing world is going to develop and they're going to need energy to do it. Well, I mean that's -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥absolutely, I mean that's -- in fact, somebody was saying today that Reno and Nissan are developing cars, that they're going to sell in China and India for $3,000. So these are, you know, these are gasoline-driven or diesel-driven, I don't know which, probably one of each. But, gasoline-driven cars that are going to -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥so when you've got, you know, 2 billion people that are, finally, with a bit of luck, finding their way out of poverty here and energy is a crucial component of getting and increasing your standard of living, yes, it is inevitable to me that there's going to be some enormous demand on the energy system. Now, what level is inevitable, I mean, I think it would get -- all get better efficiency, you know, we can ameliorate that little bit, but we're going to have a big increase in demand for energy, that's inevitable. I know. Where does fossil fuel, and gasoline, and oil, and all those things that come under that heading, fit? Well, you know, right now, this coal and natural gas, I mean, petroleum in the world is about 40 percent of the -- total energy. And natural gas is about 20 percent, coal is about 25 percent. So, I think if you add all that up you get about 85 percent. Hope nobody is checking. But I think it - --it's somewhere about that. Somewhere about that, you get 85 percent, on top of that you get some nuclear, maybe 5 or 6 percent, and then everything else, renewables and, you know, wood and all kinds of things that people burn around the world --they're about the last few percentage points. So it seems to us that, with this surging demand, we're going to need to tap all of these sources of energy now, which is a huge challenge. So, that includes oil, and it includes gas, and it includes coal, but it certainly includes renewables, it includes biofuels that a lot of work we're doing today and others are. It includes nuclear, you know, power. We have to have more of that. And then if that's not complicated enough to do all of that to supply this energy demand, in-comes, sort-of, climate change and environmental requirements and the complexity of the puzzle then gets really difficult. And I mean that's the big challenge here, I think as some of these, clearly coal is challenged from a CO2 perspective. Oil is challenged from the CO2 perspective. So, then, that's when we've got to really dig into our technology toolbox and get much better at figuring out how to make fossil fuels work. Because, I would say, at the end of the day there is no way that we're going to be able to live without them. The world is not going to advance the way the world's going to advance- Not that I'm aware of, and not that anybody is aware of. But we would be wrong to say that that it is all going to resolve the fossil fuels, because it is not. Renewable fuels are going to be really important, nuclear power is important. Frankly, I think that's got- But the point you're thinking on nuclear because then that has not -- that is not a major source of energy in the United States of America, it is in the other parts of the world, but it isn't here. You think it is going to happen? Well, I think it's got to happen. Why do you think it's got to happen? Well, it's got to happen because without -- frankly, all of these sources of energy, you know, nuclear power in the United States actually is going to get less. You know as some of these old power plants became, you know, outlive their certification. So unless we do something, United States nuclear power is going to become less. I would say, at least in the world, it's going to be a big -- it's going to be a part of a solution. Whether we can get it done in the United States or not, I'm not sure. But some pretty thoughtful people, you know, I guess the pair from New Mexico, in the opinion of Domenici, Senator Domenici is a big supporter of nuclear power, and maybe it's got something to do with there being uranium in New Mexico. But nevertheless, I mean, there are some supporters of nuclear power in the government. I think nuclear power is -- frankly, we think it's a very clean fuel, a clean power. Obviously, there're issues associated with the waste, but I guess I'm a believer in technology that those can be solved. But we've got to get behind it and spend money on the technology and moving some of these things forward as opposed to debating who is going to win and who's going to lose here. Are you into nuclear in a big way in Chevron? We're not in nuclear and it never happened. And we came very close to it at one time, but we managed to avoid it. But I do think it's going to be part of the solution and they seem to have solved the problem in France, and they seem to have solved the problem in Japan. At which -- you know, Japan, particularly is a very, very environmentally conscious country. Yeah, they've solved the problem of nuclear wastes there. So it seems to me that we've -- these are some of -- these are tremendous technology challenges. Carbon sequestration is a tremendous technology challenge. But you know we've dealt with technology challenges before. We need to focus on carbon sequestration; we did focus on nuclear power waste, and get on with it, instead of all this fussing about who is going to win - Who is going to lose, right. What do you state the leading technological problem in the fossil fuel department, in your business? What is it you're trying to solve right now? Well, it's interesting. You know a lot of people talk about peak oil, you know, that somehow oil production in the world is going to peak, because it is running out. And, you know, our view would be, and frankly, you know, if anybody's interested there's going to be a study, I think maybe the most important study on climate change is about to be published by a group called the National Petroleum Council. And this has got a broad range of people that are involved in this, this goes a long way past controlling the industry. But they're going to talk about peak oil, and we're going to answer Secretary Bodman's question on peak oil. But the -- I would say that there is never -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥we're never going to run out of oil. But, you know somebody once said the, you know, Stone Age didn't end because we ran out of stone. You know, somebody came along with a better idea, and I don't think we're ever going to run out of oil. But I do think that it is becoming, for lots of reasons, more and more difficult to produce the oil that's in the ground; either it's because the water is deeper, or the desert is harsher, the Arctic is colder, or the politics are impossible. You know so it's all these, sort of what we call above-ground risks that are making, constraining, or straining the supply of petroleum in the world and natural gas, and at the end of the day they're going to beat the thing, I think, particularly the politics frankly, that are going to eliminate our ability to grow any further. So, I do think that in, you know, 10 to 15 years this sort of non-OPEC part of the world is probably going to peak, in terms of its ability to produce oil. So that's a big, you know -- there you've got a big issue, itÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¢s not going to grow beyond that. But when you said politics, what do you mean, specifically, what kind of politics? Well, I come from California. We, cannot drill for oil in offshore California. Well, it's a -- it was a bad thing when we invested $1 billion out there and then we're told to go away. That was a bad thing. You know we've got one story --I'll get off the United States in a minute --but, you know, we bought some leases from the U.S. Government in the Gulf of Mexico in a place called Destin Dome, probably 15 years ago now --not far from Florida. We drilled a bunch of wells; we discovered a lot of gas, natural gas. No oil in it, clean natural gas. We submitted development plan to the government. It was turned down, it was turned down, it was turned down. And finally, the government basically insisted we give back the leases. So I would like to say the only place that weÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¢ve been nationalized in the last -- in my career, short of Venezuela in '70s, was in American. But what do we do? Because we couldn't produce that natural gas in Florida, we went off to Angola, and we drilled a lot of wells in Angola and we built an LNG facility in Angola. We built ships to bring the gas to -- natural gas to Florida. We built a terminal on the Gulf Coast, to put in a pipeline, and send it to Florida. Now, I mean the -- what are Well, that's what we're doing now. I mean we're in the process of building that LNG facility. I'm saying because we can -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥because the politics --I would call that a political risk, because the politics in the United States in that particular area of Florida made it impossible for us to produce natural gas there, that we're having to go elsewhere in the world, somebody else is going to allow us drill wells in their backyard. We're going to spend, I think, it's like $9 billion on this project and we're going to bring this gas to Florida, and people in Florida are going to get natural gas. But it seems like a, you know, it seems -- first of all, to me it seems arrogant as a nation that we should do that, but it just seems impractical too. And it seems like if we want to be less dependent on the rest of the world, then, I'm going to avoid energy independence here. But if you want to be less dependent, which I think is a good thing, then that's not a good way to go around being less energy independent. Being --the phrase, 'We must stop being dependent on foreign oil'-- we're restricted beyond natural gas, it's restricted to oil. That's hallucination is it not? Well, I think it is but, I think there is a very, I think, the idea that we should not be overly dependent on any one regime or any one group in the world, is a worthy goal. I don't think that we should be held hostage, and that's probably the wrong term to use because I just got some hostage back in Nigeria in my own Company. But I think that spreading a risk and having lots of sources of energy, and lots of sources of oil and gas around the world, I think that's a good thing. So, that means that's got a lot of implications for our foreign policy, its got lots of implications for the, you know, the way we run our business in Washington. So, apart from increasing the energy production in the United States for a whole variety of sources, one of which is oil and gas, I think that maintaining a breadth of relationships in the world and working on relationships around the world so that we have lots of different sources of oil and gas, I think it's really important. Because I think we get to the point where if weÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â¢re dependent on anybody, that that's a bad thing. And I certainly support independence from that perspective. But as a general rule, rule of thumb, for your Company and other like companies, the major oil companies, you all have pretty much made the decision that the future supplies are not going to be in the United States, they're overseas, right? Yeah, that the most -- the opportunities for us are largely overseas. Although we're still spending, you know, $6 million a year, something like that, in the United States. So, it's not like we're --well, the way we just made some huge discoveries in the Gulf of Mexico, which were very well publicized, in very deep water in the Gulf of Mexico using state-of-the-art technology; and there is more to be found in the United States. I mean somebody estimates that the USGS or whatever there might be 115 billion barrels of oil to be found in the United States. If you, you know, if you could explore -- everywhere, and I'm not recommending that, frankly, because we've had some bad experiences, and sometimes it is not worth it. Sure, also, say the politics wouldn't allow it even if you wanted? But the politics elsewhere, which is really a question of elsewhere in the world, I mean we're just dealing with Venezuela and they're tough in lots of - Explain the Venezuelan thing to us? Well, you know, in Chevron's history, if you go back to 1946, we discovered a big oil field in Venezuela --in 1976, and we produced it for 30 years. In 1976, we were nationalized, along with the rest of the industry, a whole lot of industries were thrown out of Venezuela. In 1996 --a lot of 6s in this one -- in 1996, they had an opening, the Appetuera they called it. The industry was invited back in -- we actually went back to the old oil field that we were producing all these years, all the employees that we had, and Venezuelans came back to work with Chevron, which they were very happy about, and we produced that oil till 2006. In 2006, the Government of Venezuela decided to change the deal. And so we negotiated with the government and ended up with a deal that we thought was reasonable, pretty acceptable, from our perspective. I mean there was a -- we lost a little bit on it but not a lot. So we ended up with a new deal in Boston. Now, we're in the last few months, the President of Venezuela decided that they wanted to do the same thing in this big area with heavy oil in Venezuela where there are a whole bunch of companies involved. So Exxon, and BP, and Chronicle, and Chevron, and a variety of other -Total- and of course the Venezuelan National Company is there. So, he said, ÃƒÆ’Ã†â€™'I want Venezuela to own 60 percent of all, even though we only own some 30 percent, some 20 percent and some 40 percent, I'm going to own 60 percentÃƒÆ’Ã†â€™". So we entered into a negotiation with the Venezuelans. All their companies entered into negotiations with Venezuelans, and while it's not -- these are not signed deals at this point, so it's probably not much I can say. It's evident from my own releases and from the press, that we've decided we've got an acceptable deal with Venezuela and we're going to stay and the two other big American companies, Exxon Mobil and Conoco Phillips- -- Conoco says 'we're gone', Exxon, in good fair tradition says, 'we're working on it'. And so, you know, you don't know what that means. But I think clearly they're having a tough time negotiating something. At the end of the day who won? I don't know. We think we got an acceptable deal. Our business is to stay in these countries to continue to produce oil. We think we're doing a lot better job of it than anybody else. Frankly of course we think that. We know we do a lot better job of it than some of the government companies around the world. So, we think that the world's better off and we think, you know, the States' is better off, and we're sure Chevron's better off by us staying in Venezuela, whereas continuing to look for opportunities in the future in VenezuelaÃƒÆ’Ã†â€™ÃƒÂ¢Ã¢â€šÂ¬Ã‚Â°regimes come and go. You know, regimes change. I mean, we've been -- 1946 was when we started that. There are lot of regimes since then, and so we, you know, we live through this and we have --you would be amazed, actually we have pretty good relationships with the working people and the government in Venezuela. I think Venezuela is a specific, and a little bit more general premise --that people often hear them say 'wait a minute, this is our oil'. This is Venezuela's oil. We should have the right to develop the way we want to do it and whatever profits come out of the ground, should be ours, we should not have to share them with Chevron, Exxon, Mobil and all these big American oil companies. How do you respond to that kind of stuff? Well, it is their oil. But, if we can bring proposition to them that says, look we can bring some technology; we can bring expertise; we can bring some capital sometimes -- today, everybody has got capital, so that really doesn't get you very much -- but the technology and expertise and know-how; that we can organize this thing. We can do, you know, around the world, we do lots of community projects and in Venezuela we've refurbished, I don't know how many orphanages at this point. It's not that the government of Venezuela does not have money to do this. They just haven't done it. But, you know, in the communities where companies like ours --and we're not the only one -- where we operate, we do some, I think, pretty phenomenal things for the community. And so I think it can be in the people of Venezuela's interest to have us there. I mean most of the deals around the world, now the government gets about 90 percent. In Saudi Arabia, they get 90 percent. In Indonesia, the government gets 90 percent. But, 10 percent is enough to make us a profit and give us a reasonable return on our investment. And so we think there is a deal that can be struck and usually it turns out that way that we can bring something to them and they can give something back. But it is their oil, so we've got to earn our right to stay there, everyday. Do -- when you negotiate, when you and your fellow oil companies negotiate with -- whether its Nigeria, Venezuela or any of these countries, do they see you as a representative of the United States of America or what? Well, they often attribute a lot more power to us than we deserve. I mean, and so in many cases they do think of us as representing -- I mean we're an American Company, so they do think -- consider us as representatives of the United States. In our -- and these countries our employees are 90 percent nationals. I mean, in America we're 90 percent Americans and then in Nigeria, we're 90 percent Nigerians. And then Angola we're 87 percent, I think, Angolans. So our Company is basically made up of people from the host country. But do they think of us as an American Company and oftentimes they, you know, they think that we can make things happen at Washington. We usually can't, but at oftentimes, you know, it sometimes helps us when they think we can. Does the U.S. government -- are they by your side when you negotiate? No? They have no involvement at all? I mean I shouldn't say they're not. They're not fighting us, but they, but no, they're not there. You're there as an individual Company? We're there as an individual, absolutely, as a Company and you know, the U.S. Government has played a role in some ÃƒÆ’Ã†â€™Ãƒâ€š sort-of, infrastructure things, for instance, pipelines out at the Caspian area. And the U.S. Government played a strong role in -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥actually not pushing our pipeline, pushing a competing pipeline; but pushing the access for Central Asia and oil to the west. And it was getting it out of this, you know, sort of former Soviet sphere. So, the U.S. Government, frankly, was very, very helpful and this was during the Clinton administration. Both the President and Vice President were involved in helping us, helping the industry, not helping really any particular Company because they've got to be very careful in helping Exxon, and helping Chevron, and helping Conoco with the others, getting kind-of -- but they were helping the industry to work with some of these governments to get routes for pipelines out of there. So, on occasion, with big sort of infrastructure, things like that, they can help. But when we're negotiating deals at Chevron we're negotiating with nobody else. Let's go from a big picture to a little picture -- that would be a big picture to the people who would be forming this question, why are gasoline prices so high --- in the United States of America? All right let me rephrase the question. Why have gasoline prices risen so high? Well, I think for all the reasons I've been talking about. The -- supplying the world is growing. I mean, we've had increases in oil prices over the years that have been caused by somebody cutting us off, probably, having people shutting things in -- that's sort of a --what we could call supply-oriented shock. What's happening this time is on the other side of the equation sort of a demand oriented thing. I mean the world is growing and these huge population centers of the world, China and India and Southeast Asia and, frankly, United States, and their demand for energy is continuing to grow and growing, frankly, at a quite high rate. And for all the reasons I was describing about the difficulty of some of the political situations around the world and serving some of the technologies that we need to get to, some of these places and the timeline that it takes to get some of these projects put together, the supply system's really constraint. And so there is a -- so world oil prices are up, and that's not something that -- you know Chevron's 2 percent of the world's oil business of the world -- it's 2 percent. So Exxon is about -- you know, they're a bit bigger, they're about 4 percent. You know so we're not managing the price of oil in the world, we're part of that system. So world oil prices are up and that's about 50 percent of the price of gasoline, is crude oil. The other 50 percent is made up of, you know, about a third of the other 15 or 16 percent probably is taxes. And all those are state taxes and federal taxes. And then the other piece is refining and marketing and distribution and transportation, all that stuff. And the other reason that gasoline prices most recently have been up is because of the strain on the U.S. refining system. You know, the U.S. refining system is operating at pretty close to capacity and demand continues to go up. The U.S. refining system continues to grow, but it is not growing fast enough to keep up with the demand in the United States. So we've had high oil prices that have been big part of it, and tight refining. Now, there's one other thing that's kind of going on in this country too and that's in effect making the system a lot more inefficient, and that is you know, what we call the "Boutique Fuel Problem." We got 18 blends of gasoline or types of formulas of gasoline in United States. California has got its special blend, you know, Memphis, Tennessee has got a blend, Birmingham, Alabama has got a blend, Chicago's got a blend, and these are all -- these are all different formulas for gasoline. So effectively, if there is a shortage in one area and you've got a surplus in another area it is very difficult to move, you know, the refinery in this area is tuned for this blend, the refinery over here is for this blend. So we have -- by the complexity we have introduced to the system, and now by introducing state-by-state ethanol mandates or specs rather than a federal mandate but state-by-state, we are compounding that issue. So we are making the whole supply system very complex and effectively reducing capacity. So the culmination of that, refineries being pretty tight anyway, and high oil prices are all causing us to be where we are today. But if you look back at, you know, I think 20 years -- I think 20 years ago the, you know, peoples -out of peoples income 3 percent was going to gasoline and today 3 percent is going to gasoline. But as you know Peter -- an awful lot of people don't buy what you just said - on the grounds because they're- Yeah, but it is coming at a time when all this is happening, gasoline prices are going up, your profits are going up. Yours and all the other oil companies are going up, and the connection is being made all the time. How do you respond -- but well,what is the connection? I will tell you the connection. I mean, we have -- the prices are up because supply is constrained. When supply of any product, any product -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥orange juice in Florida; when there is a frost, price of orange juice goes up. The supplies constrained, prices are going up, we are an investment vehicle, so our job is to invest our earnings and we do. And so last year we earned $17 billion which is an astronomical number by anybody's measure. But this year we are going to invest $20 billion in our -- in oil, gas and refineries around the world. Over the last 5 years we have earned $53 billion dollars and we have invested $53 billion. Now the precise number is a coincidence, but it is a fact. So we invest, and prices are going up; that tells us the market's saying, 'we need more investment, we need more supply', prices go up, we have more money to invest; we invest it and hopefully that will, you know, bring on the supply over time. That is how that equation works. Why? The first part of the equation, you said, was that the cost is going up. So if the cost is going up why is the profit going up? I mean, in other words, wouldn't the cost and the price go up at the same time at the same level? Otherwise if your cost go up 15 percent, wouldn't the cost -- the gas cost, the gasoline go up 15 percent, but it is much higher than that, is it not? Now the -- But it is a market. Again if you go back to the orange juice in Florida, I mean when the frost hits and most -- a lot of farmers lose their crops, the other guys know there is a shortage. The other guys sell their orange juices; their cost is still the same as it was, but they sell their orange juices for higher price. I mean the market -- if there is a shortage the market will force prices up in order to get more investment. And that is what is happening here. Its the supply, I mean its the age-old you know, somebody was saying, Daniel Yergin, you know, wrote this book about the oil industry and the price, you know, the last hundred years of the oil industry and he said the two means - -- the two -- yeah, won Pulitzer Prize for that -- the two main characters were supply and demand -- throughout this book. And that is -- it is a fact, I mean the supply is tight right now in the world; the supply of refining capacity is tight in the world. And the market is forcing prices up because there is a shortage, or there is a tightness, anyway, and there's lot of other reasons, some of which I just described. But the market is forcing their prices up and that is telling us, you know, we are earning lots of money, and -- but we are putting it all back into investments. The people that are benefiting from, you know, the company being successful frankly and earning money, all the folks have mutual funds and pensions plans and everything that Chevron stock in it. So it is not like, you know, we're sort of wheeling this out the door and -- backdoor in wheelbarrows or something like that. We're either returning it to our shareholders who invest in our company or were reinvesting in the business at levels that were -- if somebody had said to me 5 years ago we would be investing $20 billion a year, I would have told him you are crazy. Where are you investing the $20 billion? Well, I said, probably $6 billions in the Unites States and probably - In drilling wells in the Gulf of Mexico as much as anything, in building platforms, you get this Tahiti project; it has been in the Press a lot recently, it is $3.5 billion project. It is going to produce -- in other terms it is going to produce 150,000 barrels a day of oil out of the Gulf of Mexico. It is in 5000-feet of water. You know it is -- the other project that has been in the Press a lot, called Jack, is in 7000-feet of water. That is the water before you start drilling the well. The wells, you know, the oil is five miles down, you know, and so these are multi-billion dollar projects. We have got in our portfolio today we've got 30 individual projects for which our share of the project is more than $ 1 billion, 30 of them. Most of them, most of them, I would say 25 of them, 28 of them, are probably oil and gas producing projects, just like Tahiti, deep water Angola, big expansion in Kazakhstan, big expansion in Indonesia, the Venezuelan project we are just talking about, Thailand, drilling gas wells, I mean, most of it is about drilling wells, constructing facilities to produce oil and gas. There is a general premise that you have no apologies to make or any embarrassment at all about these high profits that your company and other companies - No, I am not remotely embarrassed about it, I mean I am proud of what we do as a company and I am proud of the contribution we are making to the energy supply in the world. I'm also proud of the fact that we're spending, you know, billions of dollars on trying to find renewables and alternatives. So, you know, we have spent, I think the number I saw just here, you know, the next 3 years we will spend $2.5 billion dollars on renewables, you know, the biggest geothermal company in the world, which produces -- you know, it can only produce - Actually this building is powered by geothermal, but I am talking about steam in the ground and you can only do that where there is steam in the ground, and where we do it is in Indonesia and the Philippines but we produce, you know, 1200 mega watts of power, which is a very large power business from geothermal steam. We are in the ethanol business where we have got a whole bunch of research programs on trying to crack the code or crack a series of codes on converting agricultural waste and horse products and those things into ethanol. But even if, in a while, we are successful at that, which I think we will be, frankly, I think we will be very successful at it. We have just structured a joint venture with Weyerhaeuser --you know Weyerhaeuser is the largest timber --- land company in the United States. There, you know, they know all about the science of trees and, you know, land - What are you doing with it? Well, they are going -- they have a lot of waste products, they have a lot of wood chips and saw dust and trees. And they have a lot of acreage where perhaps between the trees you can grow things. You know, so we are -- we know how to make fuels. I mean, you know, all these things are just registered for 6 million years late, I mean, all that stuff is the same stuff that all -- you know went down in the ground and got compressed and that we find it with oil. So, we are going to move and back up the train a little bit, now we are dealing with life but there are still carbons and hydrogens all mixed up together, there are still --they are almost hydrocarbons, they got a little offshoot in there so you know, we call them something else. But they are essentially hydrocarbons. So we know how to take all those chemical elements and form them into of fuels. Weyerhaeuser knows how to grow them and you know, they know all about the chemistry for growing them with the various products and what grows best so on and so forth. So, between us, its sort of like they are the upstream, they are the folks that are drilling the wells and we're the folks that are making the fuels. So we're not there yet. There's a lot of technology to be -- to developed area, but I mean we are working with some really serious ventures to try and make this stuff happen. But as I said, even if we are successful, and I think we will be, it is probably going to be, you know, it could be 10 percent or 15 percent of our energy supply sometime in the future. What is it now? Right now -- start with gasoline, right now it is 3 percent of the U.S. gasoline supplies as a whole. Three percent. Now we are using 13 percent of the U.S. corn crop. So if we used all the U.S. corn crop, we would be up to-- you guys can do a bit of math but -- you know 40 percent or some -- I mean 30 percent. So we wouldn't be -- we can't use all the U.S. corn crop, because then it shows up in everything -- the cost of everything else. But we think that probably from the U.S. corn crop, with the advances that are being made there, that we can get 10 percent of our gasoline supply coming from food sources. So to get beyond 10 percent what we really got to do is find a way to use the waste products, the corn stalks and the switch grass and the -- and all these other things, trees and wood pulp and wood chips and cardboard and lots of waste in California agriculture -- excuse me artichoke plants and all these things. Well, not the artichoke, but the- you've got this little size and then you've got the plants of this size, it is this thing I am talking about - -- so that we can make our stuff into fuels. There is still no big idea, no big thing that is going to certainly revolutionize this and make it go beyond 10 percent or 20 or make it a -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥something -ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â¥MR. Well the President's program is 20 percent. And the Congress is essentially talking about 20 percent. So I am saying, about 10 of it can come from the food based sources and the rest of it has got to come from new technology that we are working on, but still only 20 percent of our gasoline supply. It is not anything to do with buildings or -- now, I mean the big idea always was hydrogen, you know that is the -- but that is -- so far that is long way the future. I mean we have hydrogen stations. What is the problem? What is the problem with hydrogen? Well, the problem with hydrogen -- you know, everything that we play with ourselves is a bunch of carbons and hydrogens all mixed together in different formulas. And so all you got to do is take the carbons off to do something with them and use the hydrogen. And we can do that, but what do you do with the carbons? I mean -- now, you got CO2 basically, so what do you do with the carbons. And the scale of the business and the scale of what -- of this hydrogen -- of this carbon sequestration, our project is so enormous that we haven't found any economic way of doing it yet that is acceptable from the environmental perspective. So there is a huge challenge, but it is the challenge we ought to be - Yeah, I mean we have got -- we do have some hydrogen stations but, I mean, in a way our hydrogen stations or -- the hydrogen comes from natural gas. You know, so you got -- in the United States we have got natural gas infrastructure all of United States, pipelines and -- in people's homes. So we have put these hydrogen stations, you locate it on top of a natural gas pipeline, you extract natural gas from the pipeline, you put this through this little black box and you produce hydrogen and it goes in the car. But the fuel too goes in the air. And the hydrogen is bloody expensive. And we were -- we have got a fleet -- bus fleet in Oakland, California, that is running on hydrogen; three buses, each of them cost $3 million, each of the buses. You know, so I mean, we are just learning right now, we are just learning how to make the buses, we are learning how to make the hydrogen, we have got to learn how to make it in an environmentally acceptable way and we have got to do it, I guess, at less than 3 dollars. And today we are not- we're just not there.