From the Prize to the New Map: An Interview with Daniel Yergin
This week our special guest is Daniel Yergin vice chairman of S&P Global and author of the Pulitzer Prize-winning book “The Prize: The Epic Quest for Oil, Money and Power”.
Dan’s most recent book “The New Map: Energy, Climate, and the Clash of Nations” now has a revised edition. “The New Map” has been described as prophetic, predicting that Ukraine would be the scene of confrontation and conflict between Russia and the West.
Here are some of the questions Peter and Jackie asked Dan: Why did you foresee the conflict between Russia and the West playing out in Ukraine? As a result of the invasion, is the world moving towards being more bifurcated? Do you think Russia’s oil and gas production will decline? Do you see any scenario in which Russia withdraws from the Ukraine war, or is greater escalation more likely? How has the relationship between the United States and China changed? What is China’s motivation for wanting to take back Taiwan? How will the US Inflation Reduction Act (IRA) change the energy map and the US relationship with China? Do you think the recent US permitting reforms will speed up projects? How would you describe the oil markets currently, short term and long term? Do you agree with the narrative that the world is underinvesting in oil supply? Do you see a scenario in which US shale oil would grow aggressively again?
Content referenced in this podcast:
- The New Map: Energy, Climate, and the Clash of Nations by Daniel Yergin
- The Prize: The Epic Quest for Oil Money and Power by Daniel Yergin
- See the online book about Peter Tertzakian’s Art Exhibit on the history of the light bulb
- Visit Peter Tertzakian’s Art Exhibit at Elevation Gallery in Canmore (June 10 to 30)
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Episode 206 transcript.
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian and welcome back. Well, Jackie, we are only a couple of days away from the start of summer, the summer solstice. With summer comes vacation and with vacation comes, I think, a few podcasts off. We’ve been doing it every week and it’s time to take a little time off.
Jackie Forrest:
That’s right. We are going to take July off and we’ll be back at some point in August. Thanks for all your support. This is a great last podcast for you to tune into, and you can do some other things over the summer. Peter, do you have any suggestions?
Peter Tertzakian:
Well, of course. For those of you that went, thank you very much to my art exhibition in Canmore at Elevation Gallery on Main Street. It’s an art exhibition showcasing the history of electrification and particularly my collection of vintage light bulbs and artwork. That show continues to go on until the end of June. I’ll be there again personally on Sunday, June 25th, if anybody wants to come and take a look at the collection and just have a conversation about the history of electrification and what it means to us today. But we have some more suggestions and that relates to our special guest today. We’re delighted to have back Daniel Yergin, Vice Chair of S&P Global. We had Dan, who needs no introduction, in October of 2020 when he released his new book, at the time new, called The New Map. And we understand that there is a revised edition that’s out, so some summer reading may be in order.
Daniel Yergin:
Thank you. I would love to see your vintage collection of light bulbs. That sounds totally fascinating.
Peter Tertzakian:
Well, we’ll put the link up again and send you a link, Dan. It’s really a collection that I’ve put together over the last 30 years and Elevation Gallery in Canmore was kind enough to put together the show along with a collection of the artwork that goes with it.
Daniel Yergin:
Right. By artwork do you mean paintings or ads?
Peter Tertzakian:
Yeah, they’re my personal photographs and the pop art renderings to bring out the innovators and the key business lessons that go along with each phase of the development of the light bulb from 1880 to 1920.
Daniel Yergin:
That’s fantastic. Of course, it’s all taken for granted now, at least in the developed world. But as we move towards a world that’s even more electrified, it brings additional perspective to your exhibition.
Peter Tertzakian:
Exactly. Thank you. Well, let’s talk about your new book.
Jackie Forrest:
Yeah. Dan, “The New Map” has been called prophetic by some because it actually predicted Russia’s invasion of the Ukraine. For those that have not read your book, can you explain why you saw the conflict between Russia and the West play out in the Ukraine?
Daniel Yergin:
I think fundamentally because Ukraine was a great unanswered question with the end of the Cold War, there was not a settlement and Putin refused to accept the settlement. Remember, he said the collapse of the Soviet Union was the greatest geopolitical tragedy of the 20th century, and he kept saying, “Ukraine’s not a country.” And so, it became clear that that’s where the clash was and the battles over natural gas, and energy, and Ukraine being the transit point for most of the Russian gas at the beginning of Putin’s, I guess I could say reign was through Ukraine, meant that this was the issue that was unsettled. And Putin, to use a term that people applied to other dictators, was a revanchist. He wanted to overturn what seemed to be the post-Cold War settlement.
Peter Tertzakian:
Seems like the whole trend towards globalization, post-Cold War where trade opened up between all the various countries ignored that whole unsettled Ukraine position and has led to now, basically, a reversal of globalization. And it seems we’re moving to a more bifurcated world of world trade, if not multipolar. How does that play out as you see it going forward and how should we be concerned by this?
Daniel Yergin:
Well, the way I phrased it in “The New Map” is that that era of globalization was what I call the WTO consensus. We’re all in this global economy together, we all benefit from it. In China, hundreds of millions of people come out of poverty. India enters the global economy. Standards of living go up and you get really impressive economic performance. Well, that era is ending and it’s ending pretty fast now as we move into this new era of great power competition, which hopefully does not become great power confrontation. It’s been accentuated by the Ukraine war because that has, to use your phrase, Peter, bifurcated the global oil market into two. What was the global oil market, it’s now two different oil markets. And the same thing has happened on a larger scale. You see companies now semi-spitting off their Chinese subsidiaries to make them semi-independent. You see investors in Canada and the United States rethinking their commitment to direct investments and equity investments in China. It’s all going in a different direction, and that means a less efficient world economy and it means higher costs.
Jackie Forrest:
Right, and it could potentially mean more conflict. But in many ways doesn’t it also tell you that there’s consequences to these types of wars, like Russia is now, I think a weaker country. They’re more dependent on China, they have less trade partners, and they have a smaller economy. They probably are going to… I’d be interested to know if you think they’re going to reduce their production of oil and gas. Isn’t this a signal that conflict doesn’t result in any gains?
Daniel Yergin:
Yeah. I know that one of the very senior people reached out to Putin a few days after the war began and said, “You’re going to throw away 20 years of economic progress by doing this.” And he’s done that because Russia was mainly integrated economically with Europe. It was its most important market for oil and maybe it’s really its only major market for natural gas. Putin slammed that door and now as you said, Jackie, Russia ends up basically economic dependency on China, it’s Chinese goods that are now replacing Western goods in the stores. And there’s no question that if it’s a partnership between Xi and Putin, it’s very clear who the senior partner is and it’s not Vladimir Putin.
Peter Tertzakian:
There’s also a partnership with Russia and OPEC in the OPEC Plus, and this sort of statement about the current circumstance of oil alliances. We have OPEC Plus dominated by Saudi and Russia that have every interest to have oil prices higher, and we have the United States who wants oil prices as low as possible because we’re still very much tied to an oil economy. How do you see the tension between the two halves playing out?
Daniel Yergin:
I think it’s an interesting question for the United States that it used to be that the US was a total beneficiary of low oil prices when it was importing most of its oil. Now it’s a very mixed question because you have some regions that it’s actually the oil price is very important as producers. Others, it’s more consumers. I mean, after all, the US is now the world’s largest oil producer. I think the US is schizophrenic on it. But I think the Saudi view, which is primarily the OPEC view, is stabilize the oil price, keep it from fluctuating too much, and of course, prevent it from going down. I think Russia right now is more focused just on volumes on maintaining its position as a seller, even though it’s taking a hit on revenues. Russia hasn’t brought down its production.
We do expect that there will be a decline, not the kind of precipitous decline that some people thought, but a decline there. And I think its LNG business is stymied will not, cannot grow, because it really needs Western technology there, and it ends up with a lot of stranded gas that it can’t sell to Western Europe. You can put oil onto shadow tankers and send them to India, but you can’t put a natural gas pipeline on a tanker and send it somewhere.
Jackie Forrest:
I just want to hit on what you talked about that you think Russia may bring down its production. There are a lot of sanctions on Russia that are limiting its ability to access money technology. Do you think that even in that, it’ll be a fairly small reduction in their production, or do you think there could be a major one?
Daniel Yergin:
Of course, no one knows. Probably the Russians don’t know, and we don’t know the problems in their supply chains. But the Western technology companies may have withdrawn, but the 3000 or the 5000 or 6000 people who work for them are still there. And they do have access to China, although China has an accomplished oil industry. That’s why we tend to think it won’t be like at the three million barrel-a-day drop that some predicted in right after the invasion, but that it will ease down. But right now, every barrel that they can get out, they’re getting out through all these mysterious gray channels. The ghost fleet.
Peter Tertzakian:
Yeah. I mean, Dan, you talk about the rise of Russia. It’s an accomplished oil producer in the prize and it’s been producing oil for over 150 years. And so, is there an argument to be made that sanctions actually make countries under sanctions more self-reliant and ultimately this strengthens their own internal supply chains and that they’re going to actually be stronger as an energy supplier, not weaker?
Daniel Yergin:
I don’t think they’ll be stronger. I think you raise a question. I mean, the impact of sanctions is quite mixed in terms of what it does when you look historically at what sanctions have worked and don’t work. I think your comment more applies to China because on semiconductors, basically sanctions saying you can’t sell semiconductors, that’s a huge signal to the Chinese where they need to put resources and capabilities and they turn out a lot of engineers. And I actually participated in a conference where the message to the Chinese companies was self-reliance, to use your term. I think it’s a big driver for China. I think for Russia, there aren’t these great breakthroughs that they’re going to have. I think that resources, supply chains, those will be parts, and so forth. A lot has been smuggled in now through or sent in through Central Asia, but I think it has an impact. And I think on LNG, as I understand, that’s the area where the to grow that business really does require Western know-how that is not easily obtainable elsewhere.
Jackie Forrest:
All right, Dan, before we move on to a different topic, I had one more question on Russia. This conflict, it’s very hard to predict, but what do you think the likelihood is that Russia withdraws from the conflict? In my view, it seems that it’s not going well for them. Or do you think it’s more likely that the result is even more escalation? I mean, we saw some news releases about nuclear weapons being moved into the area.
Daniel Yergin:
Over the weekend I was reading a book about the origins of the First World War and about how many miscalculations went into it. And Putin certainly has made enormous miscalculations here, thinking the war would be over in four or five days and his troops could march in a victory parade in Kyiv. But over the last few days, he’s made his nuclear threats again and he’s moved nuclear weapons, he says, into Belarus. It’s a situation where he can’t afford to lose because then his whole legitimacy is out the window and he’ll do whatever he needs to do. On the other hand, I think the West has decided he can’t win because of the repercussions of that.
At this point, I think the planning is probably for a stalemate. I think Putin is waiting for the 2024 American presidential election and I think from the Ukrainian side it is to see if they can decimate the Russian supply lines and push the Russians out. But it now has a bit of a World War I quality to it with the people in trenches and offensives and counter-offensives. I think nobody’s betting on a quick end to this or any quick negotiation. I’ll say one other thing. Since Russia has broken every agreement it made about Ukraine, it makes it hard to negotiate a settlement with them at this point. It’s a bleak outlook.
Peter Tertzakian:
But let’s move from Moscow and Kyiv to Beijing and Washington and back to your book, The New Map. You wrote in your book that we should watch the G2, which you classify as China and the United States. And of course, there’s a lot of tension there as well. Do you want to talk about some of those tensions and prophesies about where you see China and the West going forward?
Daniel Yergin:
Yes. One of the maps I pay attention to is the map with the South China Sea. And this is the most important waterway in the world from an economic point of view. Something like 30 or 40% of world trade passes through it. China claims it as its own, and for anybody who wants to understand how this has come about, I went back and traced the origins of the conflict to a voyage made by three little French ships in the early 1930s to claim some islands, which then led to a violent Chinese reaction and maps and so forth and their claim to the South China Sea. It’s remarkable how the relationship has changed from this very cooperative relationship.
I remember talking to the CEO of one of the major Chinese oil companies when it was doing an IPO more than 20 years ago. And I said, “Why do you want to do an IPO and have to report to young analysts in Singapore or New York or London, or Hong Kong?” And he said, “We have to benchmark against the world economy.” Well, they’re done with that now, and it’s now the China dream. And China’s really changed under Xi Jinping. It’s much more emphasis on the party, on state control. It’s very important that there be a dialogue between the US and China and the efforts are obviously continuing to do that. But the issue, of course, of Taiwan is just so central one a Chinese military person described it as a core, core interest, and there’s a sense there’s a timeline there.
And I think that the US, Japan, India, and Australia formed this thing called the Quad to try and create a deterrence, but China interprets it as containment. In the book, I said, “Watch Ukraine.” Watch these areas too because there’s where room for accidents can occur and people misreading other people’s intentions. Let me add one other thing even though you’re hearing about decoupling or de-risking supply chains, I think people don’t understand how fully integrated China’s economy is with North America and with Europe and vice versa. People don’t think about it. We learned it with COVID in terms of masks. I heard recently that much of the vitamin C that people take in Canada and the United States comes from China. Who thought you depend upon China for your vitamin C?
Jackie Forrest:
Yeah. We’ve learned that a lot of things come through China. I want to just ask you a follow-up question on Taiwan. Just for our listeners, what is China’s interest or motivation about Taiwan? You said there was a timeline and doesn’t Russia’s situation and China looking at that change their calculation?
Daniel Yergin:
Jackie, I think that’s a big question that’s being debated here in Washington, that second part of the question. China says that, just as we said, that Ukraine was the most unsettled part of the end of the Cold War. Taiwan is the unsettled question from the Chinese Revolution and the victory of the communists in 1949 because the mainland Beijing continues to say, “Taiwan is ours and it belongs to China and it’s not a separate country.” And the Taiwanese say, “We may not be exactly a country, but after what happened to Hong Kong, we don’t want to be part of China.” And by the way, Taiwan is essential to the world economy because it produces 90% of the high grade computer chips. Everybody depends upon it.
But China claims it as its own. And the timeline is that Xi Jinping has said various things about his mission is to end the division of China and they go on about territorial sovereignty, although there’s a native Taiwanese population but that’s a timeline. And some here in Washington, say in 2027, the Chinese military would be capable of doing something.
So the debate in Washington is, “What lessons has China learned from the war in Ukraine?” One lesson is that things don’t go the way you think they’re going to go, that there are going to be many surprises that whatever your plans are once the battle starts, it doesn’t go that way. Secondly, that they’ve learned that the West has been surprisingly, to them, unified in terms of its response. And Putin never thought that would happen. Because he thought Europe was so dependent on Russian gas that they would say, “Oh, this is terrible, let’s get on with it.” That’s on one side of it, a more unified Western response.
The other lesson from it is if you’re going to do something, you go in with massive force and get it done right at the beginning and don’t allow it to draw out, which is the lesson that they will have drawn from this conflict. One thing is certainly their confidence in Putin has gone down a lot. He’s shown himself, really, in fundamental ways, incompetent and his judgment is deeply flawed. Maybe I could say there’s one other lesson there too. When a leader is isolated and talking to very few people who only tell him what he wants to hear, the world gets more dangerous.
Peter Tertzakian:
Yeah. Well, let’s move from Beijing to Washington and think about price shocks. All three of us are students of history and what happens from price shocks. And if I think back to the 1970s, and this pattern of shock and awe in the economy, followed by a whole bunch of policies and a large part of the policy to get off oil. And we’re seeing the same sort of thing, whether it’s in Europe, under the Ukraine war in February 2022. We get the price shocks on oil, on LNG. And the combination of climate policy combined with energy security leads us to a showering of policy. And in the US, the massive Inflation Reduction Act, the IRA, which is showering trillions of dollars. That was not in your book. What do you think about rewriting the energy map as a consequence of the policy rainfall that’s happening in Western countries?
Daniel Yergin:
Well, I think that some of it was certainly in place. I mean, Europe’s commitment and Europe’s Green Deal, and just so it’s more of the same for Europe. The IRA is a different deal. It’s massive, it’s agnostic. It has something for everybody in there. It has hydrogen, it has carbon capture, it has biofuels. It also has tax credits for wind and solar that go to 2043 and some say maybe 2053. And the estimates of the amount of money, as you say, it’s measured in trillions, not hundreds of billions of dollars. And it certainly, it’s also acting as a magnet. I mean, European companies, and this is one of the reasons the European Union is so angry with the IRA. It’s drawing European companies to spend their money and invest in the US, not in Europe. And I hear that from a lot of companies changing their investment plans.
It’s a really big deal how it actually is implemented. We had at our CERA week conference this year. We had the Secretary of Energy and then the people from the Department of Energy, and they’re very keen to get the money out the door. They want investments going. There is a big obstacle, and that obstacle is called permitting. And that’s what stands in the US, even more so than, I think, in Canada, permitting is a huge obstacle. You’re going to need a lot of minerals for this energy transition and takes 10, 15, 20 years to get a mine permitted and get through the litigation in United States, you can certainly do it faster in Canada because Canada’s a country that sees mining as part of its DNA.
Jackie Forrest:
Dan, I’m not sure things will be faster in Canada. I mean, we’re just sitting here with our trans mountain pipeline, which is more than a decade in the making, and because of that has cost a lot more. I think most Canadians would think it’s worse here, but there have been changes. With the Debt Ceiling Bill, there were plans to streamline the federal process, I think one year for certain types of reviews and two years for the other at the federal level. There are differing views. Some people say that’s not going to address the problem. What’s your perspective? Is that going to make a big difference?
Daniel Yergin:
Well, I think anything helps. As one person said, that’s about a quarter of what was needed to do that. But then you have the, and I don’t know if it’s as severe in Canada, you really have the litigation issue in the United States where the suit can go from one court to another, and where the whole purpose is just to prevent things from happening. But the mineral question is really critical. In The New Map, I say we’re moving from this era what the newspapers like to call or the headline big oil to big shovels, and a lot of mining. But we figured, we did a study, spent eight months on it at S&P looking at copper and saying, “Well if you have these 2050 goals, how much copper do you need?”
And you said, “Well, to achieve them…” This goes back to where we started, Peter, with electrification. With a lot of electrification, you need to about double copper production by the mid-late 2030s. How are you going to do that and where are you going to do that? Do you think oil is concentrated? Three countries produce 40% of the crudes, Saudi Arabia, the US, and Russia. Two countries produce 40% of copper. Peru, where the president is in jail, and Chile, where the new president doesn’t like mining, where there are these obstacles that go beyond. There is some reform there, it’s but it’s still going to be getting things permitted.
Peter Tertzakian:
Oh, yeah. These are big, big issues, and the geopolitics of oil shifts to the geopolitics of critical minerals, which is frankly no better if not worse, globally. And then there’s the whole permitting above ground. Here in Canada, it takes seven to 10 years to permit a new electrical transmission line. And the theoreticians say, “Hey, it’s easy. We’ll just go electrify everything and away we go by 2030, 2035.” But just doesn’t work that way.
Daniel Yergin:
I didn’t realize your transmission lines take that. Sometimes you just can’t get it done. Even in Canada?
Peter Tertzakian:
Well, I think in a lot of Western democracies, because of the population density and all sorts of regulatory barriers at multiple levels of government. The federal government here in Canada, it’s provincial, and then in the US, it’s state level. In Europe, of course, huge population density. I mean, it’s easy to say electrify, but actually getting things built is a whole other thing.
Daniel Yergin:
It’s interesting because we talked about the return of energy security. And in Germany, in the face of what looked like a really severe crisis, the Greens, the environmental parties in Germany, and the coalition took the lead in terms of getting these LNG importing facilities permitted in a matter of weeks or months, which normally would’ve taken seven years or maybe would’ve taken forever. In a crisis, people will do things, but you have to have a sense of crisis.
Peter Tertzakian:
Yeah. Well, that’s not a good way to run things, is it? Wait for a crisis.
Daniel Yergin:
No.
Jackie Forrest:
Yeah. I will hope that that’s an example though for Western countries that Acceleration Act for LNG that Germany did because I think we need major reforms and things to move much quicker. I want to come back, though, to China with the IRA. China really is dominant in clean energy. And now the US is saying they want to take all those supply chains and bring them back to the United States. They want to make the batteries right to the critical minerals and the processing of the minerals. How is China looking at this? I know I read some articles that China’s actually saying, “We don’t want some of our clean technology to leave China,” and they may actually make laws so that companies can’t share how to make wafers or different types of technology. How does that play out? Does the US win?
Daniel Yergin:
It is. I mean, the IRA, a lot of it, language around it, and you read some of the other things. Well, the Chips Act in the United States and others, even the critical mineral study from the government mentioned China as the competitor. And the Chinese are reading this and they don’t want to give up their position of dominating 80% of the solar market. And they have a capacity to underprice and make other things non-competitive in other countries. And so, I think there is a trade war going on, an investment war going on.
The Chinese really do have a predominant position in minerals. And that’s where one of the things I focused on because you could see it coming, in The New Map, was where the clean energy objectives clash with great power competition because of China’s preeminent position there. And so many countries, developing countries, China’s their main market. “We like the United States, we want to have a relationship with the United States, but our livelihood depends on China.” We’re doing this energy Asia conference coming up in Kuala Lumpur in Malaysia, and into preparation, one of the themes is you just see how economically dependent Southeast Asia is on China for its economic wellbeing, and it doesn’t have the trade agreements that could have been done with the United States. If I could just say one thing about clean energy, that term is used, but the clean energy revolution depends upon a lot of mining, which people will do to the best of their abilities. But as you know, people who don’t like oil and gas, don’t like mining either.
Peter Tertzakian:
Yeah. And there are 50 shades of green, as I like to say. And so, what is green when you outsource it to other parts of the world? I think what’s interesting, Dan, is when we think back to the history of oil around World War I, there was the great scramble where the nations of the world were scrambling for the world’s oil supplies. And now we have the equivalent great scramble for critical minerals. And it’s much more concentrated, as you point out.
Daniel Yergin:
Yeah, that’s a good way to think about it. It is a scramble and there are a lot more players involved too.
Jackie Forrest:
Well, Dan, for the last section, we wanted to talk about oil markets and get your views on that. The Saudis announced a one million barrel-a-day cut. It was in early June, but oil prices barely changed. How would you describe the sentiment of the oil market right now?
Daniel Yergin:
Well, of course, it can change, as you both know, and it can change in a matter of weeks or months. But I think the oil industry, generally the expectation in the investment community was in the second half of the year, you would see the market tighten and that would start to really get a floor under prices. And I think the Saudi cut was an effort to A, discourage shorts and so forth and affect expectations, but also as a bridge to the second half. Well, we’re pretty close to the second half. And the big news for the world economy is that the much-vaunted Chinese rebound from its COVID opening has not been as vigorous as it was thought. And the Chinese government is now looking to put more stimulus into the economy because they’re not getting the uptake they’d expect it. And that’s affected oil and it’s affected many of the other major commodity markets as well.
There’s a lot of banking still that the second half is going to be firmer because fundamentals will be stronger with the Chinese recovery. But we see some of it in terms of travel, but we don’t see it in terms of manufacturing and manufacturing exports. That’s the big overhang. And then the other question which you started with is when do Russian exports start to ease downward and tighten on the supply side? That’s out there. And then on top of that, much of Europe is now in a recession, and recessions are not good for oil demand or for commodity prices.
Jackie Forrest:
It’s a really wait-and-see market, right? The market’s not going to react until it sees signs that there’s real tightening. But let’s switch to longer term. There is a growing narrative that the oil and gas industry is under-investing in new supply. Do you think that’s true? And you think that should be a concern of global leaders about where the oil supply’s going to come from three, four years from now?
Daniel Yergin:
Yes. Well, we’ve looked at the numbers. That’s our conclusion, that we’re seeing under investment that companies are more cautious, pressure from investors, returning money to investors, and investors have to get a return. Why would they invest otherwise? And the ESG pressures. And also the uncertainty about the longer term. You’re not seeing many people doing mega projects anymore. I think it all adds up to what I’ve called a preemptive underinvestment on the assumption these investors and others that, “Oh, the new economy is all ready to take over,” except as you all know, it’s not. [inaudible 00:30:52] as well. I think that’s a risk out there. And that’s one of the things that it’s very different, but we’re pretty much on the anniversary of the oil crises of the 1970s, and it partly came about because of the protracted period of underinvestment.
Peter Tertzakian:
Well, this key in on the investors’ desire to get their money back, basically, and dividends and share buybacks. And last week we had Eric Nuttall, a big portfolio manager in the energy business, talk about that. I guess the question is, under that scenario, do you see any scenario by which US oil production grows aggressively again?
Daniel Yergin:
I don’t see it growing aggressively. I do see it growing for a few years, but I don’t think you’re going to get, to use your phrase before, a mad scramble. And I think there’s a sense that the shale is maturing, that it isn’t like it was in the last decade. Was your guest last week also was talking about under-investment in the sector?
Peter Tertzakian:
Oh yeah, absolutely. Absolutely.
Daniel Yergin:
I mean, Shale is very important, but it’s not going to ride to the rescue. I think the general view is that the relative shares will shift back to the Middle East where they are investing to expand capacity, particularly in Saudi Arabia and Abu Dhabi.
Jackie Forrest:
Well, many of us have memories of Saudi flooding the oil market as a way to flush out the US. If the US doesn’t grow, do you think that those sorts of scenarios where Saudi does something unpredictable, like look for market share growth again, overpriced could happen?
Daniel Yergin:
Well, I think the US will grow, but not at a rapid rate. But I think in these circumstances, you wouldn’t expect the Saudis to do that. When they did that in the 86, it was at one point, Saudi Arabia was producing less oil than the North Sea, so it was a very different circumstance. I don’t think we’ll see that. I think we might see that on mineral investment by China on bringing new mineral resources to bear. But I don’t think that would be in the Saudi strategy these days. I think their interest is in stability.
Peter Tertzakian:
And really, the underinvestment is an underinvestment in Western supply, which is even more concerning, given the bifurcation of the markets we talked about earlier on in the podcast. The underinvestment is really an underinvestment in free-market Western oil producers, which is really quite concerning given the bifurcation of the markets that we talked about earlier on in the podcast.
Daniel Yergin:
I think that’s right. And of course, also, Russia was one of the areas where Western companies were investing, and that’s not going to happen anymore. You can imagine greater fragility in supply. And despite predictions that oil demand was going to go down, the signs are that oil demand will… It’s a debate, does it peak in the late twenties or in the early thirties? But that it will certainly going to grow for the next several years.
Peter Tertzakian:
Well, it’s all a fascinating discussion and we’re lucky to have you back again, Dan. But I think it’s time to wrap up. We talked about your book, the New Map, and the revised edition. We’ll put a link up to that, published by Penguin. Encourage many people to read it because it just offers such an important perspective on not only oil markets, but it’s energy markets in general and how, as we talked about in this podcast, the scramble for critical minerals in the pursuit of clean energy and decarbonization in many ways is no different than the scramble for oil supplies 100 years ago. And there’s just so many recurring themes, whether it’s trench warfare, a la World War I that we’re seeing too, the behavior of individual nations. It just seems like history repeats itself over and over again. Any closing thoughts?
Daniel Yergin:
It’s funny you say that, because of course we assume history doesn’t repeat, but certainly it echoes, or it resonates with the past. And you do see patterns recurring, and we’ve seen that certainly in energy markets. I think the questions about electrification and how that proceeds are very important and certainly understanding energy transitions that I urge people to… One part of The New Map to focus on is on understanding why this energy transition is so different from all the others. There’s a lot to think about and I’m glad to join you and wish you both and all your listeners a good summer. And please send me the link to your electrification exhibit, which again, I think resonates with questions and issues that we’re facing today. Thank you for the opportunity to come back and join you on the ARC broadcast.
Peter Tertzakian:
Well, will do.
Jackie Forrest:
Yeah. And thank you, Dan, so much for coming back. Please think about your summer reading list, listeners. There’s The New Map, there’s also The Prize. When the invasion first happened in the Ukraine, I went back and looked at some of those chapters in The Prize. It’s such an amazing resource. That’s another great summer reading. Bye, Dan.
Daniel Yergin:
Bye. Thank you very much. Bye, everybody.
Jackie Forrest:
Thank you. And thanks. To our listeners, if you enjoyed this podcast, please rate us on the app that you listened to and tell someone else about us.
Announcer:
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