A New Era For 'Big Oil'.(Interview)

Byline: Rana Foroohar

Energy markets have never been more turbulent. Fear of terror, Middle East instability and the fate of the floundering Russian petroleum giant Yukos have driven oil prices to new highs--and stock markets to yearly lows. Investors around the world are beginning to fret about how global warming and carbon caps will affect the long-term future of fossil fuel companies. British Petroleum CEO John Browne, a man known for both his business acumen and his environmentalism, says high prices are here to stay. He spoke recently with NEWSWEEK's Rana Foroohar in London. Excerpts:

NEWSWEEK: Oil prices--where will they go from here?

BROWNE: Clearly they're going to be higher than $21, the long-run average, or even the $25 average adjusted for inflation. That's lower than in the 1970s and early '80s. But I don't think we'll see a period like we did in the '90s for really quite a long time.

Let's talk about demand. You've said that the oil and gas industry needs to invest another $2 trillion by 2015 to meet global energy requirements.

The industry, including the state-owned companies representing 80 percent of global production, has spent about $160 billion a year over the last decade. That has to go up to $200 billion over the next 10 years. That's beginning to happen. There are ample oil supplies, ample capacity coming on stream, and that oil will be needed, even if the product we put in cars is not just oil but something else, and even if cars use both oil and generated electricity or battery-stored electricity.

In terms of cleaner energies, a lot of people are talking about natural gas. Is it the next oil?