[MUSIC] Now that the price of oil is declining,

it's not what it used to be. Maybe some of the countries

will find it easier to cut or eliminate the subsidies, what you think? >> I
understand your point, in fact,
it's clear what you say is true. In fact, in some countries, a number of oil
producing
countries are trying to reduce. By the way, something which is very
well stressed in some studies but is very very important,
who benefits from the subsidies of these? In fact, there is a lot of studies will
show you that most of the subsidies, who win if you pay only $0.02 for
the gasoline? If you don't have a car,
you don't benefit from any subsidy. So it has been shown
that most only the 20%, the poorest population just
get something like 5 or 10% of the city subsidies,
all of us so very, very limited. So you have to progressively,
you have to reduce but of course, it's very difficult in some cases. I take always
the example of Venezuela. In the 1990s,
the government tried to increase and beat the price of gasoline and
you had huge protests in Caracas. And as far as I remember,
1,000 people were killed in the streets. So you can imagine the top of government
panicked them to increase the price and to reduce subsidies. A good example or so
was the example
of Nigeria, much more recent. Two or three years ago, as the price
of gasoline is very low in Nigeria, they subsidize again. As the government tried
to reduce by 60 or
70% the subsidy, so the price of gasoline was
close to the market value. And in fact, the disaster was into
neighboring countries because because of the subsidies. Of course, what happened
you have
a lot of smuggling around Nigeria. You have products coming and
you have especially the case of Bina, which is both a province and
state in Nigeria country close to Nigeria. In fact, for a few weeks, there was
simply
no gasoline in the country because most of the gasoline was coming by
small ships from Nigeria. And of course, because of the increasing
the price, the supply of gasoline stopped. So what happen in Nigeria is
the government reduced by 60% in the first steps of the subsidies. At the end, it
came back and
say we just reduce the subsidies by 30%. But it was successful in increasing
a bit the price of the product and reducing the total subsidies. >> Let's come back
for a moment to Europe
because in Europe we also have a problem derived from the fact that there is
advanced diesalization of the car fleet. We rely a lot on cars that
only run on diesel and the demand for
gasoline has suffered from this. >> True,
it's a complete change in your business. We've tried the example of France
already for that but we try to do so because it is an extreme example. This is a
country with the highest
proportion of the diesel cars in the total car fleet, the car population. I have
kept this in mind in, 20 years ago, the demand for gasoline was close
to 20 million tons per year. Now the demand for gasoline is less
than 10 million tons per year. At the same time, of course, you have a huge
increase in
the consumption of diesel. Not only because we have dieselization
of the car population, but also because what happened that's
the case in most countries. You have most of the additional
transportation is made by trucks. So you have huge increases
in the demand for diesel, first by the cars but
also by the trucks and. >> But this must cause a problem
because out of a barrel of oil, given the quality of oil, you get necessarily
some gasoline, some diesel and so on. If the only thing that you
can sell is the diesel, what are you going to do with the rest? >> This is a good
question. You can perhaps, to put it simply,
if you have the first refineries will be totally refineries we had before
the offshore refineries which were never raised on a traditional coal like
which is a typical I would say. You get 20, 30% gasoline, in 20,
30% diesel and the rest was fuel oil. And because of the falling for the demand
of fuel oil is worth 10% of the market, something like that. Most of the market is
for gasoline and
diesel and petrochemical shale, so a light product. So what we can do in a refinery
is
transform the fuel oil which is heavy by definition into light products
like gasoline and diesel, more or less. Any way that you are stuck with
a minimum quantity of gasoline and a minimum quantity of diesel. And in fact, as we
have discussed, we have
too much gasoline and not enough diesel. So we have in Europe, and
especially in France, that is in Europe, we have refineries on. Where you're seeing
too much gasoline,
not enough diesel oil, and too much fuel oil, so clearly this
is a very difficult situation. This has very bad consequences on
the economics of the refineries. And perhaps we could improve a bit
the situation by implementing new process in the refineries. But this is all
usually extremely costly,
and since the economic situation of the refining industry in Europe is poor,
you have no money to invest. People just try to keep the refineries
open, and to manage to get a few cents from each barrels they
produce, but they cannot do much more. >> So what happens with the gasoline
that doesn't have a market in Europe? >> This is always something which is
surprising me as a way refiners manage to take, in fact you cannot
sell your product. You have too much gasoline,
you have too much fuel oil, you cannot sow this into seeds,
it's clear. >> [LAUGH]
>> They're not allowed to do this. >> Thanks God. >> Thanks God. So as they manage
to find some market and
something or so which happened today,
we have this new situation. I would say, it's a quite new situation. For long, what
happened? I said as a joke ,of course, that every morning, that was ten,
even five years ago. Refiners in Europe or the managers
were coming in the morning and praying for the market for gasoline
in the US remaining a large market. Because this is a reverse
situation in the US. In the US, they consume very large of
figures, 5% of the population in a world, 20 or 25% of the oil consumption. Which
means something, is a range of
20 million barrels a day in total. And half of this is gasoline, so
ten million barrels a day, and they are repeat very often. Out of two gallons of
gasoline in
the world, one is used in the US, the rest is used in only one
in the rest of the world. So you had a huge market for gasoline. The problem now is
that it's
a different kind of the so called light type oil, which as
the name indicates, a light crude. By the way, this is replacing all
the crude oil coming from Nigeria, Angola, West Africa. With this light type oil,
you get a lot of gasoline. And of course, reversal on the demand
side, you had a lot of efforts by the US government in order
to reduce gasoline consumption. They replaced a bit of
the gasoline by ethanol. It's not very good from
an environmental point of view, from an ecological point of view. But they give
subsidies to the farmers,
so everybody's happy more or less. You ever saw a new quote we call a new
regulation to reduce
the consumption of gasoline. Just to give you an example, for
instance, some time ago, I'm not sure, but having these huge vehicles
that some people like. With one gallon, which is four liters,
you can drive only 10 or 20 kilometers, something like that. As they want to go to
some to stand out,
with one gallon, you can drive 40 or 50 kilometers or miles, something like. And of
course, as a consequence of this, you have a reduction in
the consumption of gasoline. >> You mentioned ethanol, that's very interesting,
what is the situation with biofuels? Are they making progress? Is there progress
being made
with biodiesel, with ethanol? >> You see, I would say, ten years ago, biofuels was
supposed to be a very
good solution to the problem of. Of course, we knew that we could
not produce all the gasoline and the diesel from biofuels but
it was supposed to be good. All of a sudden,
at the beginning of 2007, what happens? You had riots in Mexico because
of poor people especially were very unhappy because the cost of
the basic food increased tremendously. And why is the cost of the food increased?
Simply because the ethanol which is
produced in the US is produced from corn. >> Corn.
>> And corn is a basic food for the Mexicans, the low income,
the poor population in Mexico. So you have a pick an area. You have some
competition between food and
fuel. And that's why the consumption
of the biofuels. Typically, I would say that at best,
we have something like it was a target in Europe to have 5% or
some 6% of ethanol in the gasoline. You have or in most countries,
you can buy pure gasoline, you can buy gasoline with
a small amount of the ethanol. It is not developed. So what we expect,
what people expect is that we go from a single generation one which was
made from corn, from sugar cane, for instance, which was an efficient
way to do it in Brazil. To a second generation or to make some
biofuels from algae from seaweed. And that is still in the research step and
we don't know what will happen with this but typically, I don't expect
any big development of ethanol. Looking at biodiesel
is still more limited. This is some kind of
palm oil is easy because any kind of vegetable oil can be
used to fuel your diesel engine. I remember when the price of diesel
was very high, in France especially. In fact, you had people
coming to the supermarket and buying the typical vegetable oil,
which was sold for less than $1 when the price of the diesel in the
service station was between $1.50 and $2. You save money, it was no problem for
the operation of the cars. >> The car would run.