Host our conversation continues, looking at cushing oklahoma, and the role it plays in the oil industry. We want to go up to new york now, where Daniel Yergin is joining us. He is the author of both the quest, and the prize. You have been to cushing oklahoma. How would you describe it . Guest you see all of the tanks, and it is quiet, and you have the oil moving at the stately rate of four miles per hour. It is very calm, yet you realize it is one of the notable points in the oil industry, and we see on the reports of what the oil price was, it all goes back to cushing, which has been a great gathering point, really, for about a century now. Host why does it all go back to cushing . Guest there was an oil field discovered there before the First World War and it was called the queen of the oil fields, and at one point it provided 22 of the u. S. Total oil, and a lot of the oil produced by the u. S. Army in europe was made in cushing oklahoma, and the oil system was old, but the Pipeline System had been set up to move supplies around so it became the gathering point. It all flowed through cushing and went out to other pipelines two refineries around the country to make products like gasoline, jet fuel, and heating oil that people need. Host some have called it the capital of the american oil kingdom. Would you agree with that . Guest i would say it is a very key point in the oil industry. It is funny, when it was a boom town and they were producing a lot of oil there, people said any red blooded american would catch the oil fever there, for now it is very calm, and it is a Central Point of gathering really, for north american oil. Host and you are in new york. Lets go back to the wall street component. Bloomberg businessweek reported that each day some 900,000 oil future options and contracts are traded on the new York Mercantile Stock Exchange and oil in cushing is what is bought and sold. Why is that . Guest when you have a futures market, as you do for oil, you need a delivery point. Not everybody takes delivery. Only a fraction does. You need some physical embodiment of oil, and it is the oil in cushing that is used to backup or the Reference Point for the prices you have in the futures market that people trade. Here, in new york, and around the world, people are trading constantly, and vast amounts of money flow back and forth, he yet it is all connected yet it is all connected to the oils barrels of oil in cushing, oklahoma. Host recently there was a glut in pushing. Why is that . Guest what has happened, and this is what you are talking about before, the u. S. Oil picture has changed. In 2008, the notion was we are going to run out of oil and since that time, all production has increased 56 . The oil is coming from new places like north dakota, more and more oil from canada, the oilsands and other parts of the country. We have more supply coming in, and our Pipeline System needs to catch up with these new sources of oil. No one, five years ago, would have said that north dakota would be the second highest Oil Producing state in the country ahead of alaska, i have oklahoma a head of oklahoma. The pipelines are backed up in cushing, and any more pipelines the Pipeline System needs to catch up with this momentous change in u. S. Oil supply. Because that is happening you have seen copies like enbridge reverse their pipeline and other companies do the same. Transcanada has gone ahead with the south leg of their keystone project, and that should be up and running soon. What will that do as far as getting the oil produced to markets . Guest what used to happen is oil would come in tankers from the middle east, the refined in texas or cushing, and now, it is like a uturn. You have this oil produced in the u. S. That has to go to the gulf coast where half of our Refining Capacity is, and a lot of products like gasoline are made. The pipelines are being turned around. It is interesting that on the white house website there is a photograph of president obama standing in front of these large pipes that you referred to, which is the southern leg of the keystone xl pipeline, and he was there to encourage that to be built, so that is going ahead. Host what do you make of him going to that area, stillwater, which is very close to cushing oklahoma a democratic president going there, talking about his Energy Policy . Guest i think you have seen a real change from where we were when the Obama Administration came in, a time when this shortage view was really there and if you go forward now, and i have found myself looking at his state of the union address, where he did not talk about oil and national gas at the beginning, and now he talks about and all of the above Energy Policy area everything policy. It reflects that he went to cushing and a focus on jobs that are a result of this developing. It is a shift and it reflects the way our Energy Picture has changed rather dramatically from what would have been expected a half decade ago. Host the president , just last week, was pitching the u. S. Economy to Foreign Investors saying companies are moving here and more should move here because Energy Prices will be lower. Guest is really interesting. During the government shutdown, he gave a press conference and he said our oil and Gas Production is greater than that of russia, and he said some good things are happening. I was at that press conference that the department of commerce put on, and we have gained from inexpensive natural gas. I was in europe, and you talk to businesses there, and they will not invest in europe anymore. They are in the United States, and there is over 100 billion of investments scheduled to come into the United States because we have a more favorable Energy Position than any of the other industrial countries. When i was in china, the chinese were worried about competition from the United States. Host we are talking today, mr. Daniel yergin, on the anniversary of Richard NixonsEnergy Independence speech. What do you think of that . Guest there are a lot of echoes. Nixon gave that speech, the company was country was in a panic. His administration was collapsing, too, because of watergate, and he gives a speech, just like john kennedy promised we would get a man on the moon, we will be Energy Independent in seven years. Host Daniel Yergin is our guest. Many of you know his book surprise, ihs vice chairman joining us from new york this morning to talk about the role cushing, oklahoma plays. John is on the independent call. Caller could these Oil Pipelines be converted to negate the effect on drought . Or is that under way now forward thinking people looking at perhaps creating water pipelines for the future . Thank you very much. Host i think that we know that Oil Pipelines and sometimes converted to carrying natural gas the direction change. I have not heard about these pipelines. Doesnt strike me thats going to happen, they will be converted to carry water. Obviously, water is a serious issue in some parts of the country. People will look at other ways to manage it. I dont think thats the direction well be going. Host about pipelines, theres a lot of debate over keystone xl and environment concerns surround that. What is the approximate Life Expectancy of a pipeline and how deep are these pipelines buried in the ground . Guest i think that, we have pipelines in the country that were built in the 1950s even so going back to 1940s although theyve been rebuilt over time. I dont know your previous caller would know, may be 10 feet or 15 feet. We have in the country, 182,000 miles of oil pipeline and keystone xl would add about 1 to that length. One of the things missing from the discussion is the fact that we have this very large system now that moves oil and pipelines sort of out of sight under ground except for kind of like those pipelines you were showing at the cushing. Host those pipelines have been in existence since the 50s and that oilsands have been coming from canada. Guest the real growth has been in the last 1990s. The amount of oil just from the oilsands producing there you have to get into perspective. That volume is greater than the volume of output from five of the opec countries. The u. S. And canada will will be really tied together in terms of energy. You look at the disruptions in the middle east and the instability there. People kind of need to keep in mind Energy Security too, the reliability of supplies. Host canadian government lobbying washington this week and the Washington Post taking out a half page ad Canada Canada americas Largest Oil SupplierUnited States brings them more from canada. David is waiting to talk to you guest that is interesting. I think i found recent years people assume that all of our oil imports comes from the middle east. But canada is by far our largers supplier. Host david from louisiana, democratic caller. Caller i like to make a comment. In regarding to ethanol, this is a really disastrous thing. Few mileage decrease to almost 15 to 20 percent. I happen to be lucky in my area. I have access to nonethanol fuel. I can put the ethanol in and get the 22 miles but if i put in the nonethanol, i get 26 to 28 miles per gallon. The toll that its taking on the land to grow the corn to make this ethanol youre depleting your soil. A possibility down the road of having to use this land to grow some sustainable crops and edible crops. Thats my comment, thank you. Guest greta . Yes, okay. You know the requirements for using ethanol were really put in back in the early part of the beginning of the century 2007 when there was great fear of shortage. Obviously, its had a lot of support from farm states. The pluses are that its brought income into those areas. It kept young people in the area but it also has its cost. About half of our corn crop goes to ethanol. As the caller pointed out you do get less mile all from it. In terms of its impact, its somewhat less. If you pull into a gas station, youll look and youll normally say 10 of gasoline is actually ethanol. Host are you for all of the above strategy in we heard from the president. We continue with our production of oil and natural gas but we also continue incentives for alternative energy . Guest yes, i think all of the above strategy is the right way to go because we have a big diversified economy. Theres not a single solution to do. I think its been very beneficial that happened to our economy, this unconventional and gas revolution has created something over two million jobs last year and it increased household disposable income by about 1200. At the same time i think the renewables the alternatives are very important. Part of the mix for the future. Wind is now 5 of our electricity. You mentioned that conference where president obama spoke last week i chaired the energy panel there and it was someone from the white house who talked about all of the above Energy Policy and really occurred to me that we have in the United States now with other countries dont have, which is all of the above energy opportunity. Thats a good thing for our economy. We have to continue the research. Thinking not only about tomorrow but thinking about five, 10 20 years from now. Host today on washington journal, were focusing on the oil side of the Energy Sector taking a look at cushing oklahoma, introducing you to that town. A town of 8000 with the capacity to hold nearly 80 Million Barrels of oil. Its the largest storage felt in our country. Tomorrow on the washington journal, our whole program will be looking at alternative energy, solar, wind and other sources of alternative energy. Patrick in granite bay, California Republican caller. Youre up next go ahead. Caller my name is patrick, how are you . Guest fine thank you. Host go ahead please. Caller how are you sir . Guest okay. Caller i have a question regarding oil and alternative energy. When t. Boone pickens came out what do we do with all of this oil . If we do put it in a pipeline. Its going to go out of our country. Even if we have all the oil in the world, we can only refine so much. What is the end game . Guest the end game, i think is a long game. Were not short of Refining Capacity in the United States. One reason were not short of Refining Capacity is because not only are we producing more but our demand our consumption gone down because of efficient automobiles. To just give you another example, if i can, we were mentioning before about president nixon project independence. Since he gave that speech and sense the oil crisis, our economy has tripled and our Oil Consumption a 7 higher. California is a particular case because its very hard to build anything in california. Even to build a solar farm can be very controversial. So california has refineries there that have been there historically and then bring its oil elsewhere. California has higher gasoline prices than other parts of the country because of the various restrictions that are there. Shortage refinery capacity used to look like a big issue because of the change in the market is not a big issue as it was before. California is the third or fourth Largest Oil Producer in the United States. Now by rail car, additional crude oil comes into the state and goes to those refineries still there and ends up in the gas tanks of motorist. Host chuck tweets this. We need high tax of exports of refined oil products. Guest i dont understand what the purpose of that would be except to tax us out of the market. Refining is a matter of factory business. We still import lot more oil than we export. The exports we do, you take a barrel of oil and you put it through a refinery system, you end up with a lot of different products. Some of it like gasoline, we use a lot of it. Others like fuel oil we dont use much anymore because we dont put oil into Electricity Generation anymore. You export some of your products as well and thats an income that flows back to the United States. I think what we dont want to do is make ourselves uncompetitive. If i can say the economy were benefiting. The economy in terms our g. D. P. And government revenues is benefiting from whats happening in the Energy Sector. Unconventional oil and gas growth, generated we calculated 74 billion of government revenues last year from the normal taxes that people pay. Host greg is next in missouri independent caller. Caller good morning greta and daniel. I want to ask you, how difficult is it to build Oil Refineries in the u. S. And why are most of them on the gulf coast . Guest most of them on the gulf coast because that has been the great center of really the oil and gas industry. Theres historic basis of it going back to the development of texas and the oklahoma oil fields. We were importing a lot of oil. The crude oil would arrive on the gulf coast and be refined and sent out to the country. Katrina and rita hurricanes hit, Dallas Airport in washington, ran out of jet fuel because that jet fuel was being refined in the gulf coast and sent up. If youre in texas i think you can expand a refinery. Theres a big project theres a 10 billion project to upgrade one refinery. To get a permit in most places to build a new refinery, even it it made sense, would be a very lengthy regulatory process. Host joy in California Democratic caller. Caller good morning. Past years we talk about Energy Independence. I am all for drilling oil here in the United States if it stayed in the United States. We didnt put we ship it and then it goes to opec and that were not really benefiting from it. Then we build the refineries of pipelines, those are temporary. I feel the same way about nuclear. If were going to im originally from nevada and close to yucca mountain, if you want a Nuclear Power plant your state stores the waste. I just dont see correlation between the prices the more oil we drill, doesnt necessarily mean the prices that we pay at the pump are lower. Guest thats a lot of questions. Let me say that i think that if the u. S. Has not seen increase in Oil Production that were seeing today, we would be looking at much higher gasoline prices, we would be talking about a new oil crisis because you have to look outside the United States. You look at north africa, you look at libya you look at nigeria and west africa. You look at iraq and number of countries in fact, theres a disruption thats going on in World Oil Supply and the growth of u. S. Supplies helped to balance that out. Think we would be looking people would be talking and complaining about much higher prices at the pump had we not seen this additional supply, which made us more secure. We do export some product that is crude oil