Fereidun Fesharaki

Fereidun Fesharaki’s condominium, overlooking Waikiki’s shoreline and Diamond Head, is evidence of his success. But it’s taken some years to achieve that, building his private consultancy since 1998.

As chairman and president of FACTS Global Energy Group, with nine offices around the world, he isn’t home much to enjoy the view. The sign affixed near the front door, a reminder to take his cellphone with him on the way out, attests to his traveling schedule. So does his “Two Million Mile” frequent-flier membership card. On the other hand, his new granddaughter and his two grown children remain a powerful anchor to keep his home base here.

Fesharaki has been tapped as a local expert on the oil industry ever since becoming an East-West Center fellow, arriving from his native Iran in 1979. The private business, however, has all but overtaken that role: Fesharaki said he retains a part-time post but returns his salary to the student program each year.

The focus of his expertise is the Asia-Pacific region, which nobody was watching when he started this business. Although a lot of people locally were startled at the announcement that Tesoro Corp. would close its Hawaii refinery, Fesharaki thinks it’s survivable.

At 65, he’s seen his share of crises, most notably the Islamic revolution in his home country, where he had been working as an adviser to the prime minister after earning his economics doctorate at the University of Sussex in the U.K. Working for the Shah’s government did not put him in an enviable position. Then the revolutionaries announced that the old regime had a window for departure.

“I was sitting in my house not knowing what to do,” he recalled. “I get a telegram from the EWC, saying, ‘Would you be interested in a one-year fellowship?’ I said, ‘Oh, yes, of course.’

“I arrived in September. By October I was sentenced to death in Iran. So had I stayed I would have been killed. For 15 years I couldn’t go back.”

Things have changed.

“Now that I have a big name,” he said, “they invite me to every conference and treat me as a VIP.”

QUESTION: Do you agree with others who say the closure of Tesoro won’t be disastrous for the Hawaii petroleum market?

ANSWER: I think that’s correct. The difference between importing crude oil and importing refined products is only important if there’s a crisis. If crude oil is your import, you can find it in different places and bring it to your refinery and make the products you need.

But if you want to import the products ready-made, then you need to make sure they are the right quality, they are made to the right specifications, the efficiency is already in the product. So it’s not so easy to find exactly what you want in a crisis. But under normal circumstances, there should not be any impact on the economy.

What’s happening is that the energy map of Hawaii is changing in a very big way. We’ve been in a world where everything has been already set. We’ve depended very much on oil. …

First day I arrived in Hawaii, George Ariyoshi was governor and he was saying, “We have the sun, we have the wind, we have the ocean. We don’t need any energy from outside.”

This is actually all really fundamentally wrong, because it’s not free. Sun is expensive; if we don’t subsidize it a great deal, it won’t sell. Wind is not free. Nor is the ocean.

So all these things have a cost. And to assume that because we have it it’s free for us is essentially something that many people in Hawaii, politicians and a lot of very good people, have deluded themselves for a long time.

Q: This was Ariyoshi’s policy?

A: Ariyoshi, and now I come to (former Gov. Linda) Lingle. Lingle is the one who created the Hawaii Clean Energy Initiative and signed it, with targets that are impossible. God cannot achieve these targets, not human beings …

We are in a very slow progress. We are, in Hawaii, part of the world. If the world makes breakthroughs, we make breakthroughs. It’s nonsense to say, “With aloha we can do better than anybody else.” No, with aloha, we cannot.

And we are a small economy. And when the government here wanted to do away with the solar subsidies … People talk about the oil company lobbies. The solar lobby’s much stronger than the oil company lobby. They created unbelievable political turmoil here so that subsidies were given. Why is this?

I believe it needs about $140 (per barrel price for) oil to make a lot of renewable energies break even.

The price of oil needs to go up another 40 percent. So at the current prices of oil, we have to subsidize. And the reason they need the subsidy, and they have political lobbyists going around to getting the subsidy for us, it only proves it is not economic, otherwise why would they do it?

Q: But don’t some people believe that we are headed for $140 oil?

A: Actually, that’s not true. I think we are actually looking down.

Q: Why would that be? Is it because supply is actually not diminishing?

A: Well, because a lot of new supplies are coming. You might have read in the press, the International Interagency Report, we’ve said for two years that the U.S. within five years will not import any more oil from the Middle East. The shale gas revolution: The U.S. rose from the second-largest importer of liquefied natural gas to the third-largest exporter. All within five, six years. This is a very dramatic change.

We can’t continue holding the old paradigms because they are shifting. We’re looking at places like Iraq, we’re looking at many places in Africa where the supply is increasing.

Plus, what George Bush started and (President Barack) Obama continued in terms of our efficiency standards, half of gasoline demand by 2030 will disappear. So actually our long-term price forecast is for oil to be $30 less than it is today.

Q: What sort of time horizon are we looking at for this?

A: I think this probably will start from 2015 or ’16, and going to about the $80 range and stay there for a number of years. Actually, it can go even lower. …

It has big impact on a lot of decisions that you made for other fuels. Actually, producing oil, conventional oil accounts for less than $20 (of the price), even in the most harsh areas in the U.S. Gulf of Mexico. So $80 oil has no impact on oil production.

But it has impact on natural gas, it has impact on efficiency standards, it has impact on renewable energy. All of them are impacted by lower oil prices — which means that unless we have technological breakthroughs on some of these things, we may have a situation where we need to subsidize even more to get renewable energy in.

If the price of oil goes to $150-$160, and it stays at high prices, I think eventually every alternative becomes economic, without subsidy. …

Q: This shift, you would say, is largely due to shale oil?

A: The shale revolution is an incredible story. The U.S. is the fifth largest shale reserve holder in the world, but the U.S. is No. 1 in going forward because the circumstances are right. Chinese are No. 1 (in reserves), but they would take 20 years to do what the U.S. has done in four years.

Q: What do you say about the environmental concerns raised about shale production?

A: I think the concerns are real. I think the renewable energy goals are good and should be followed. But our horizon needs to change.

Now, first of all, we have natural gas, which is far less polluting than oil, and it is homegrown in the U.S. and we can bring it here. The environmentalists don’t like it.

Q: Don’t they fear it because, as you’ve said, they worry that this will make renewable energy less price-competitive?

A: That’s correct. They say this interferes with the path, but the reality is this: Let’s say we don’t go to natural gas. So does it mean we go faster to solar? No. The pace of renewables is going by the pace of technology. Not (just) in Hawaii; Hawaii is a microcosm.

The global system … China is No. 1 in wind power in the world today, but they subsidize it.

Europeans subsidize solar. It will go by its own pace, but I think it is going to be much slower, maybe 20 years, 30 years later than people expect.

Let’s say Hawaiian Electric has 1,000 megawatts of electricity from oil-fired (generators), and they want to switch to solar. They cannot do it. It’s not that they don’t want to do it.

Some of these guys act as if it’s ready-made, available, and some nasty force is stopping them from getting it. That’s not the case. The case is that it is not economic today. If it was economic, they would do it. Not (only) here in Hawaii; they would do it all over the world.

In Japan they have a nuclear crisis. So what are they doing? They’re reopening nuclear power plants, although the target is to go to renewable energy. But they realize it’s a 2030s, ’40s story, that they can get there.

When people say, “Don’t bring it (liquefied natural gas) in, because if you bring it in it interferes with that,” I think that’s fundamentally unsound. Because technology’s not here. If you don’t do (LNG), you have to use more oil, because oil is the fungible material. You can bring it in, without planning. But if you want to bring in natural gas, you have to build infrastructure, you have to invest billions of dollars.

It’s a long process. …

Q: How do you answer critics who say you have a bias because your clients are oil companies?

A: Of course they say I have a bias. But the reality is that if you don’t know about the oil industry, then you are clueless about how it operates. They say, “I would like to have an adviser who has no connection to any oil company, doesn’t talk to anybody, but knows everything about it.” I’m sorry: No.
In Hawaii, who is our client? Hawaiian Electric, Hawaii Gas and the state. The three of them pay us the same amount of money. … The Japanese government is our client, but the Japanese oil industry’s also our client.

So at the end of the day, the actions and the results speak. In Hawaii, unfortunately, if you speak the truth, they say, “You must be paid off by somebody else.” You can’t ever be honest, because everybody’s “biased.”

But you analyze, and say, “OK, you say this interferes with the Clean Energy Initiative. You tell me whether the Clean Energy Initiative by 2030, that Lingle has done, is doable or not. Nobody in their right mind thinks it’s doable.