Clifford Krauss, The New York Times Correspondent

Clifford Krauss has been a correspondent for The New York Times since 1990. He currently is a national business correspondent based in Houston, covering energy. What’s his opinion as far as the Bakken’s impact on the global energy markets? He answers that and so much more on this episode of The Hegg Bakken Report!

Hegg Bakken Report: Our guest on the Hegg Bakken report has been a correspondent for the New York Times for going on 14 years now and is national – he is based out of Huston, covering energy now for the New York Times, Clifford Krauss. Thank you for joining us on the program today.

Clifford Krauss: Nice to be with you Bill.

Hegg Bakken Report: What were the things that you’d done prior to joining with the New York Times in 1990, what have you done up to that time?

Clifford Krauss: Yes, so I’ve been with the Times now for 24 years. I’ve covered a lot of things. I’ve been a foreign correspondent, I’ve been a Washington correspondent, I’ve been a police reporter, I’ve been an energy reporter. Before that I was a foreign correspondent for the Wall Street Journal, wrote a book about Central America, so I’ve done a lot of things. I’m 60 years old, so I’ve been around a while.

Hegg Bakken Report: Speaking of that book on Central America, you have been the Edward R. Murrow, fellow at the Council on foreign relations and you’ve published articles on foreign affairs. How did you choose energy as your primary focus on your coverage?

Clifford Krauss: Well, you know it funny, because over the years I have done energy stories. When I was in Argentina I did a piece about OIPF, but I really got interested when I was the Canada correspondent and I started going up to Fort McMurray and covering oil sands and I got fascinated.

When we closed our bureau in Canada unfortunately, but we did and so it was time for me to come back and I had a number of areas that I could have chosen, but I chose coming to Huston, because I saw energy as such a wonderful opportunity, because when you cover every, you are really covering politics, foreign affairs, you are covering the energy industry, the economics, the geology. I mean you can get down to the molecular level. It’s just a fascinating subject.

Hegg Bakken Report: So was it a defining movement or was is it that it had come gradually as you kept reporting on energy and things and then you made your primary focus energy.

Clifford Krauss: Well, I mean defining moments; there are so many defining moments of my career. It was time – every time you move from one beat to another in journalism, you can move into something very, very different and I just found that energy was something that would keep my interest, because it’s so multifaceted and I’ve been doing it now full time for seven years and it really is fascinating and I could see potentially doing this the rest of my career.

Hegg Bakken Report: You recently wrote a highly circulated article about the impact on oil prices that turmoil in the Middle East would cause. What did your reporting show?

Clifford Krauss: Well, you know I took a look. So I have a seen a lot in seven years. This industry and oil prices specifically have changed so much. When I started covering energy, oil prices were going up, and of course in 2008 they went up to $147 a barrel. And then the economy came crashing and suddenly oil prices went down to the 30s, 40s, 50s for a brief time, at least down to the 50s for a while and then sort of crept back up to the $100 level and it’s been going up and down the last few years around that level.

And this summer we had, the crew in Egypt, we had all of the problems in Syria and Libya and oil prices did go up, but not that much and I found that very interesting, although I really wasn’t that surprised, because there are a lot of things happening.

The first thing is and you folks in North Dakota and I’ve had the privilege of visiting the Bakken, you know what’s going on. There is an explosion of oil and gas production in this country, but the oil production over the last three years, we’ve increased in the United States oil production by a couple of million barrels a day and then of course you’ve got more oil coming down from Canada and suddenly not only are we less dependent on the Middle East, but we are adding so much supply to the world that these kind of severe problems in the Middle East and also in Nigeria and a few other, Sudan have less impact.

We basically have, we meaning the world oil markets, we have cushions that we didn’t have before, which doesn’t mean we are not going to have spikes or we are going to have bumps in the road in the future, we will, but were better prepared for them.

Hegg Bakken Report: You wrote that the world’s entered a period of relatively predictable crude prices. Why is that?

Clifford Krauss: Well, there are a couple of things. On the supply side, we have – Well, first of all relatively predictable, right. What I found is if you go back 40, 50 years, there are periods where we have a lot of instability and then there are periods where we have more stability and we just came out of a period of a lot of instability and I believe we are going into more stability and basically you look at this from the supply side and the demand side.

The supply side I just briefly went though and you folks in North Dakota see it at least, people on the Western side of the state, they know what I’m talking about. All you have to do is look out the window and you see what is happening and how much oil is coming out of the ground and this is happening not just in the United States, although at the moment its primarily in the United States. We are starting to see more Shale work going on in places like Argentina. I think you are going to start seeing it in Mexico, but also deep water drilling. So its expensive oil, but we are getting it out of the ground. So that’s one thing that’s happening.

On the other side, we are using less oil. Take the United Sates, which is still the largest market, although perhaps China has crept up to be in tie with us at the moment, but certainly per capita we are the biggest. We are actually consuming less gasoline as a country and per capita we are consuming less gasoline and there are several reasons for that. The Class A standards, the weak economy, there are demographic reasons, people are shopping online, they are working from home more, young people seem to be attracted more to an urban lifestyle.

When I was growing up, we used to like to cruise around in our cars. I think that’s less in fashion now, and around the world we are seeing more of a control in parts of the world. Some of the government subsidies are being removed on gasoline in some places, in the Middle East, the Middle East countries are starting to use more natural gas and even renewable so that they use less oil at home and so taken together, we are having a slower growth of demand, we are having an increase in supplies and so it’s just a better equation than we had just four or five years ago.

Hegg Bakken Report: What role does North Dakota and the Bakken play in the stabilization of oil prices?

Clifford Krauss: Enormous. I mean the Bakken, I feel a little funny telling people in North Dakota how important they are; I’m sure your listeners know very, very well. But here I am talking to you in my office in Huston and Texas is important too.

We have new Shale fields, particularly in South Texas and also in West Texas, you know right besides some of the older fields in the premium basin that are enormous. Taken together with the Bakken, we are producing a lot more oil we are going to in a few years surpass you know multi decade records and we are now becoming not just. We are going to remain an importer of oil for quite a while, but we are becoming a major producer now and we could be surpassing Russia and Saudi Arabia in the next 10 years; that’s how much oil we are producing and we’ve just begin.

Hegg Bakken Report: What has the Bakken and U.S. Shale done to the economies of oil packed like Venezuela, Nigeria and Saudi Arabia?

Clifford Krauss: Well, you know certainly you can take one at a time. I mean in Saudi Arabia they are also pumping at record levels and oil prices are still relatively high. I mean a $100 barrel of oil is not cheap, although even the summer when they were going up we were 25% lower than what we were at the top in 2008.

But Saudi Arabia, they are able to finance huge social programs with their oil. Venezuela has enormous problems that are rooted in, the Chavez revolution; the economy has all kinds of problems, the politicaliztion of the national oil company, the flight of 100s and 1000s of trained engineers from the company, you know the country is in bad shape. I wouldn’t say that’s because of the Bakken, of course the Bakken and the growth in the U.S. oil production does put a bit of a roof or ceiling on global oil prices and these countries do want high oil prices, particularly a country like Venezuela.

Hegg Bakken Report: Our guest today on the Hegg Bakken report is the national business correspondent focusing on energy Mr. Clifford Krauss. Clifford what do you got on your radar as far as your focus in the upcoming weeks for the New York Times?

Clifford Krauss: Well, I’m constantly looking at the Keystone Pipeline and that’s a big issue and I have been following the BP trial, which is you know on going in New Orleans and to tell you the truth, I don’t want to get too specific about what I’m working on because it’s a competitive business.

Hegg Bakken Report: You wrote about the oil reforms in Mexico recently and our listeners are interested in this market. Can you tell us what’s happening in Mexico and will the United States firms that are operating in the United States be able to play in this opening of the market in Mexico.

Clifford Krauss:

Well, the proposed reforms are potentially sweeping. But the devil is in the details, and it’s still hasn’t passed the congress. That said, I think and I thought this for a while, the last few years. Mexico is heading in a direction where they are going to increasingly open the oil business to foreign companies. I mean American service companies, the Halliburtons, the Weatherfords, they are already down there.

When it gets to deep water drilling and shale, they need the expertise, experience and capital that only you know U.S. and European and I guess Asian companies can provide and the Mexicans need to refurbish their and modernize their oil industry. It’s such a key part of their economy and especially financing their government and their social programs. The leadership understands that and is moving in that direction. So I think the future is bring for American oil companies down there, but it may take a few more years.

Hegg Bakken Report: Based on a fascinating story you wrote about China, how are they reaping the benefit of the Iraq oil boom, why is that?

Clifford Krauss: Well, it’s interesting. We fought a war there and you know who is benefiting the most but Chinese oil companies. Look China is obviously a growing economy; they have growing energy needs. They look around the world and they are getting increasing amounts of oil from the Middle East.

Their companies are going far and wide through Africa, Latin America, places like Iraq. They are very disciplined, their companies don’t answer to shareholders the way western companies do and their labor is cheap and they are able to go in and they are able to do things and they follow a foreign policy of acquisition of energy wherever they can find it. So they are – ironically their supplies are being descended by our fifth sweet.

Now I don’t necessary think that is such a bad things going forward and I’ll tell you why. I think that just as the Chinese now are financing our debt, we are offering them a vital service and it draws us together and we are going to be the two dominant economic powers of the world going forward and maybe this interdependence is a good thing for the preservation of peace. Now they have to do a little bit more to help secure stability in the Middle East, but I think inevitably they will.

Hegg Bakken Report: What do you read to stay abreast of energy development, sir?

Clifford Krauss: Everything I can get my hands on. I really do a vast amount of reading and it’s everything from Wall Street Analysis. There are a lot of oil and gas consultancies that do a lot of good work. I’m reading on the web stuff that’s coming out from all over the world, so I’m constantly reading and of course calling people. So that’s what makes my job so interesting. I feel like I’m a graduate student and I get to write for a large audience.

Hegg Bakken Report: Having said all of that, are there three books that you’ve read that have been the most influential to your professional career?

Clifford Krauss: Oh! Gees, that’s a big question. I can just say on energy, I would have to say that the best book that I’ve read is Dan Yergin’s book The Prize, which I recommend to everybody. It’s just amazing. His newer book, The Quest, is very interesting to, but The Prize a really a classic that everybody, not just people who are interested in oil and gas should read. And as far as other books that I’ve read and impacted my career, there were so many. I would have to think about that.

Hegg Bakken Report: Our guest today has been Clifford Krauss with the New York Times, a national business correspondent focused on energy. Clifford, thank you so much for your time. I greatly appreciate you joining us on the show today.

Clifford Krauss: My pleasure and I’d like to say hi to all my friends in North Dakota.