A “wonderful book” on “the transformation of the global map of power and wealth that has happened in the 21st century...Read this to find out what is really happening...wisdom remains as rare a commodity as it ever was.”
- Bryan Appleyard, London Sunday Times
In his latest book, The New Map: Energy, Climate, and the Clash of Nations,” noted energy historian Daniel Yergin captures a screenshot of the energy world as it stands in 2020, both in the shifting balance and rising tensions among nations, and in the dramatic reshaping of global energy supplies and flows. Understanding how geopolitics and energy interact is no easy feat, as even before this year’s coronavirus-induced shock to the global energy markets, the landscape was already being rapidly transformed by such factors as the American-led shale revolution, a new cold war between the United States and Russia, deep tensions in the U.S.-China relationship, the Middle East’s own reckoning with the energy transition, and of course, the urgent challenge of climate change.
Daniel Yergin is a highly respected authority on energy, international politics, and economics. His classic book, The Prize: The Epic Quest for Oil, Money and Power, became a bestseller, won a Pulitzer Prize, and put Dr. Yergin on the map as one of the world’s leading thinkers on energy and its vast geopolitical and economic implications. In decades since, Dan has continued to chronicle the global energy system. Going back to Shattered Peace, his first book, his writings from The Prize, updated in 20008, to The Quest and many others have provided the historical perspective for understanding many of today’s energy and security challenges.
In this edition of Columbia Energy Exchange, host Jason Bordoff is joined by Dr. Yergin to discuss his new book and what's ahead for energy geopolitics and the energy transition.
Daniel Yergin is vice chairman of IHS Markit and co-founder of Cambridge Energy Research Associates. Daniel received the United States Energy Award for “lifelong achievements in energy and the promotion of international understanding,” and the U.S. Department of Energy awarded him the first James Schlesinger Medal for Energy Security.
Dr. Yergin is a director of the Council on Foreign Relations and a senior trustee of the Brookings Institution. He is a member of the National Petroleum Council, a director of the United States Energy Association, and of the US-Russia Business Council. He is a member of the Advisory Boards of the Massachusetts Institute of Technology Energy Initiative and of the Columbia University Center on Global Energy Policy and of Singapore’s International Energy Advisory Board. Dr. Yergin holds a BA from Yale University, where he founded The New Journal, and a PhD from Cambridge University, where he was a Marshall Scholar.
Jason Bordoff: Hello and welcome to Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. Nearly 30 years ago “The Prize” became a best seller won a Pulitzer Prize, and put Daniel Yergin on the map as one of the world’s leading thinkers on energy and all of its geopolitical and economic implications. In decades since then has continued to chronicle the global energy system going back to “Shattered Peace” his first book, his writings from “The Prize” to “The Quest” and many others have provided the historical perspective for understanding many of today’s energy and security challenges. “The New Map” is his latest effort to capture a screenshot of the world as it stands in 2020, both in the shifting balance and rising tensions among nations and in the dramatic reshaping of global energy supplies and flows. Understanding how geopolitics and energy interact is no easy feat and even before this year’s Coronavirus-induced shock to the global energy markets, the landscape was already being rapidly transformed by such factors as the American-led Shale Revolution, a new Cold War between the U.S. and Russia, deep tensions in the U.S. China relationship, the Middle East’s own reckoning with the energy transition and of course the urgent challenge of climate change. Dan has been a friend and mentor for many years including his role on the advisory board of the Center on Global Energy Policy, so I reached out to him to hear more about all of this and discuss his new book. Dan Yergin is Vice Chairman of IHS Markit, Co-Founder of Cambridge Energy Research Associates, he received the United States Energy Award for lifelong achievements in energy and the promotion of international understanding and the U.S. Department of Energy awarded him the first “James Schlesinger Medal for Energy Security.” He is a trustee of Brookings and serves on numerous boards including our own as I mentioned here at Columbia. He is a fellow Marshall Scholar like myself where I met him and he earned his Ph.D. on that fellowship at Cambridge University. Dan Yergin, welcome remarkably for the first time to Columbia Energy Exchange Podcast, it’s wonderful to have you and congratulations on the new book.
Daniel Yergin: Well, thank you. It’s certainly been many times I’ve been to the Columbia Global Energy Policy Center, but this is first time on the podcast and very pleased to be able to join you, Jason.
Jason Bordoff: Yeah, you’ve -- you’ve been with us for since day one and -- and with me for a long time before that as a friend and a mentor, so thank you for that. And again, congrats on the new book, “The New Map”, I am holding it here as you can see on the video although this is a podcast, so people can’t see it, but --
Daniel Yergin: Yeah, yeah.
Jason Bordoff: but I can assure them I am holding it and have read it. So, congratulations on it. You -- before we get into the book, you send out a tweet I saw with a photo of you and a bunch of yellow legal pads which I -- I remember is how you wrote “The Prize”, is that still how you write books?
Daniel Yergin: Yeah, I still write on yellow legal pads because it just -- and sometimes white legal pads if I can’t find yellow legal pads because it -- I find it helps me to sort of sketch out you know, in a more relaxed way where I am going and then build it up into a text. And so, I still do it the -- the problem is with the passage of time my handwriting has gotten worse and so I really have to pretty quickly once I’ve done it is put it into the computer, so that I can actually read it.
Jason Bordoff: Well, folks can’t see this either, but I am also holding a yellow legal pad which is also my technique for sketching out ideas before --
Daniel Yergin: Yeah. Actually, I have to say it’s -- I use not a legal pad, but I use a -- a 8-1/2/11 rather than the full legal pads.
Jason Bordoff: You’ve written so much and in a truly unique way about the history of the energy sector and how it intersects with geopolitics, “The Prize”
, “The Quest”, several other books. So why write this book at this time about sort of and talk about “The New Map”, you described you talked about some key parts of the world U.S., Russia, China, The Middle East and then the energy transition. So, why this and why those places?
Daniel Yergin: It’s because it’s a time of disruption so much has changed what seem to be the course of a decade ago that the U.S was just going to become more and more -- importing more and more oil, the significance about the oil from Middle East and just all these other things. And it really started in my mind thinking actually that in a literal sense we had a New Map in terms of the flow of energy supplies and the relationships that come from that. I mean imagine the U.S. is exporting oil and gas to China. I mean you wouldn’t have thought about that a year ago, but so it was and -- and that grew up into this larger thing thinking about how the map of energy and geopolitics has changed and is changing and what it means.
Jason Bordoff: So, let’s follow them -- and why call it the map -- The New Map?
Daniel Yergin: Well, it was because it was really to provide a way for people to see where we’re going to see how these relationships are changing and to help you know, everybody including myself in writing the book to put the pieces together. And the map became you know, the image for it and of course maps also tie into geopolitics you know, if you’re talking about geopolitics you’re also talking about geography.
Jason Bordoff: So, let’s follow the map you layout, you start with the United States and you start there with the man named George Mitchell in a small town in Texas in 1998, I think many who study energy will know who George Mitchell is, but tell -- tell everybody about that --
Daniel Yergin: Yeah.
Jason Bordoff: and why you start there why is that, so --
Daniel Yergin: Yeah, it’s -- it’s the other George Mitchell, it’s not the former Senate majority leader George Mitchell.
Jason Bordoff: Yeah.
Daniel Yergin: This is George Mitchell who was not an oil man, he was a gas man and pretty successful you know, he’s wanted to kind of work for himself and he built up a substantial company, but he had a real problem going into the 1980s and into the 1990s. He had a contract to provide 10% of the natural gas to the city of Chicago and it’s fields were running down and he read a paper by one of his -- a draft by one of the people who worked for him saying something that completely went against everything the petroleum textbooks said which is that you could extract natural gas from very dense shale rock. It was just -- that was dogma that couldn’t happen and it took about you know, more than a decade and a half to crack the code at the end of the 1990s with this well in Texas which I went to look at and it’s just a now a little structure surrounded by wires. And then another five years till whether it’s really successfully yoked with this other technology horizontal drilling and that gave us a Shale Revolution and the Shale Revolution is one of the surprises that was coming and people just didn’t see it was coming and didn’t see the scale of it. And I think even to people who were at the forefront of it never imagined it could have the impact that it has had.
Jason Bordoff: And is it fair to say when it started people thought it would be limited to natural gas, didn’t see that it would expand to oil as well?
Daniel Yergin: Yeah. Again they said well it can’t be oil because the oil molecules are bigger than natural gas molecules and this one another character in the book name Mark Papa said well let’s look it up and it kind of went to the text books to find out how big is an oil molecule and they couldn’t get an answer. So, they used advanced medical technology -- imaging technology to figure it out and they said, well wait if this works for gas this could work for oil and let’s try it.
Jason Bordoff: Yeah. And so -- shale obviously has been enormously consequential in -- is one of the -- one of the key innovation in energy history economically, environmentally, geopolitically and as you know, there are and you write about there are very strong views about whether the pros out way the cons and how they play out. Your book focuses on geopolitics, so I just want to ask you about the geopolitical impact that you think it has that the U.S. is -- was before COVID basically just about to become a net oil exporter is now a net gas exporter. You write in the book I’m going to quote for a second, the geopolitical consequences for the United States now that it is almost self-sufficient are apparent in new dimensions of influence, increased energy security and greater flexibility in foreign policy, how so talk give -- give us some of what that actually means?
Daniel Yergin: I’ll -- I’ll give you some examples, but I think it’s also you know, you said the pros and cons before we dive into that, you know, I think that there is not a -- a wide recognition of just the impact this has had on the U.S. economy in terms of what it’s meant for the scale of business investment, the scale for manufacturing industries in the Midwest, what it’s meant in terms of over 200 billion dollars of investment in new factories in the United States and elsewhere, what it’s meant in jobs and what it’s meant in government revenue, so I think that’s all there in balance of payments. So, that s part of it, but I think they’re more ineffable thing to get your hands on is as you say what is it mean for foreign policy and I think I could give you two examples, one whether you agree with President Obama’s approach to Iran or President Trump’s approach to Iran or what could be President Biden’s approach to Iran, none of that would work were it not for shale, because when the U.S. created the original sanctions by President Obama to bring Iran to the negotiating table, it was to -- sanctions on their export of oil and Iranian said, they laughed they said it won’t work is the world needs you know, needs our oil. It turned out the world didn’t need our oil because of shale which meant that we had our own oil to replace Iranian oil along with other supplies.
And -- and so that was one example, but I think something that brought it home to me more dramatically is the story I tell in “The New Map” and it’s something I don’t use the word “I” in the book, I don’t use the first person, but I was a conference in St. Petersburg, Russia and the speakers with Vladimir Putin and Angela Merkel and then I had the opportunity to ask the first question, my first question for President Putin is what are you going to do about diversifying your economy, so you’re not so dependent upon oil revenues, but somehow I mentioned the word “shale” and that got him going and he started shouting at me and you know, not pleasant to be shouted at by Vladimir Putin in front of 3000 people, but it occurred to me because -- and you’ve seen it subsequently the Russians look on shale as a -- as a adjunct to U.S. foreign policy for the same reason giving us flexibility in the world that we simply did not have before. And in a sense putting behind us 50 years of high degree of dependence on imported oil and with the constraints that went with that.
Jason Bordoff: And is that -- let me ask you a question I’ve thought about this the -- the sanctions the example that you have the flexibility to take oil supply off the market somewhere else, is that -- is that an ongoing permanent feature of shale or is that sort of a sui generis example of a moment in time in which shale was growing very rapidly which is maybe different than when it’s consistently at a certain level and when oil prices are 120 rather than 40 or 50, is -- is that a flexibility that will continue to be the case or was that like a moment in time?
Daniel Yergin: Well, that’s a -- a good question because you know shale when it comes back after the COVID crisis is almost certainly not going to grow at the rate it did before it’s going to become more of a normal part of the -- of the energy system, but it is a basic contribution to U.S. energy security and flexibility, I guess you can think of one other example, you know, a very current one which is the Trade Deal that the Trump Administration made with the Chinese, exports of U.S. oil and gas are an important part of that, so that’s another example of it, but you know, circumstances will change, but you know, you know, what -- what shale has done is changed the -- the game of global oil you know, for decades it was OPEC versus non OPEC then it was OPEC plus, but now it’s a big three it’s U.S., Saudi Arabia, Russia and the U.S. actually the largest, number one.
Jason Bordoff: And maybe, tell me if you agree, one of the things that is consequential about shale is not only how large it is or how quickly it maybe growing, but the fact that it is -- as we’ve seen in the last six months, it is more flexible, it’s going to fall more quickly and rise more quickly, so that allows --
Daniel Yergin: Yeah.
Jason Bordoff: it to be responsive to disruptions in the oil market and the other sources now?
Daniel Yergin: Yeah, I think and I don’t know if this term was used much before shale, but part of the vocabulary now in the oil business is short cycle and long cycle. Long cycle is spending 10 billion dollars to develop an off-shore oil and gas field. Short cycle is investing in shale and having production in 90 or 180 days, so you’re right it’s -- it becomes a -- a kind of market driven responder and regulator of the oil market not in a conscious way where somebody is making a decision -- a mega decision, but a cumulative impact of thousands of individuals decisions.
Jason Bordoff: Which again is what we’ve seen in the last few months with the historical oil price crash, you saw an agreement by OPEC Plus countries to cut production and then U.S. production has also fallen something like two and a half --
Daniel Yergin: Right.
Jason Bordoff: three million barrels a day, but you know. I want to shift to Russia which is the next point in your map and then -- as they make the transition by talking about the impact what you were just talking about on Russia. So you mentioned in a minute ago Vladimir Putin yelled at you, but -- but we’re still seeing Russia export gas Nord Stream 2 will probably get built we’re seeing volumes from Russia into Europe go up, so in terms of the impact it’s actually had, do you see that -- what is the impact, is -- is Russia behaving differently because there is more competition in the market?
Daniel Yergin: Yes, it sounds funny with Nord Stream 2 the pipeline from Russia to Germany under the Baltic, so controversial and sort of in the state of like suspended animation, the bottom of the -- of the Baltic Sea, but until this happened, what was actually happening is the European Gas Market was becoming as the Energy Minister of Lithuania said depoliticized because you had yes Russian gas, Russia is a large supporter -- supplier has a lot of inexpensive gas, so it supplies about 35% of Europe’s natural gas, 10% of total energy, but the Europeans have choice. They have first of all in response to the gas crisis of the first decade of this century, they’ve built a lot of flexibility into their system, so they can easily move gas around, but secondly it’s something that you know, Jason you know, you’ve studied carefully which is the role of LNG in terms of providing flexibility.
Europe is a market where LNG ends up when it can’t find any other markets and it means that buyers in Europe have choices and so you know, I think it was classic you know, I think the Lithuania case where they said gee it’s really interesting once we finished building our LNG receiving terminal gas products prices went down, isn’t that interesting, just a coincidence. So -- so I think that there always been this debate and one thing I have in the book that people don’t know is that this issue of Russian and Soviet oil and gas exports to Europe has been an issue for about 70 years, no, do I have it right no -- no not 70 years I am sorry, 60 years going back to the Kennedy Presidency and certainly growing there was always the - -the same rhetoric over and over about Russian energy being used for political purposes and there was a big battle over Russian natural gas in the 1980s that has echoes of what we have today. And it’s just interesting you see the same language over and over, but kind of what you know, what is different about it now is we have a much more global competitive energy markets where you’re not just dependent upon the pipelines.
Jason Bordoff: Yeah. And as you say that is consistent with some of the research we’ve done at the Center on Global Energy Policy and -- and others have as well finding that even though volumes may -- may not decline sharply, it’s not that Russia -- Europe is using less Russian gas, but you see Gazprom in Russia behaving more like a market actor where forces of supply and demand are helping to shape the price and competition is having a bigger impact.
Daniel Yergin: And one lesson that I took away it applies and it applies now when sanctions have become such an important element of U.S. foreign policy and certainly something that the Center has you know, done a great job in terms of illuminating the issues, but I think of a quote from George Shultz when he was Secretary of State in the 1980s and dealt with the earlier you know, Russian gas exports to Europe crisis and he said, sanctions are a wasting asset you know, that over time they have less impact people find alternatives they work around and it was very striking for me you know, kind of when you’re writing you put pieces together and you see well we’ve put these sanctions on Nord Stream at the -- in December of last year to stop it. At the same time, within weeks Vladimir Putin and Xi Jinping had this elaborate tripartite ceremony starting this huge power of Siberian natural gas with Russian natural gas going to China. So, you know, I think there’s always that question about sanctions and how you use them and I know the work of the Center has -- has been about how sanctions are a tool, but the flexibility you need to apply them.
Jason Bordoff: Yeah and Richard Nephew has sort of warned about the overuse of sanctions as has Jack Lew who’s at Columbia SIPA now. How much --
Daniel Yergin: Well, I think it’s worth -- pausing on that because he was Secretary of Treasury and he was very key in putting the original sanctions in place on Russia after Crimea and Ukraine, but -- and yet he’s been quite explicit in saying you know, if you overuse it people will find their way around it and the thing that will not be good for U.S. role and the world if people find their role around the dollar because that’s where a lot of our power of sanctions comes from right now.
Jason Bordoff: Yeah, which is hard to move past the dollar, but you know, the more you use sanctions the more motivation you give people to try. How much of an impact do you think sanctions are having on Russia right now on the energy sector?
Daniel Yergin: I don’t think that they’ve been of dramatic impact actually I mean it probably helped them if they weren’t doing expensive off-shore arctic projects when the price of oil collapsed. And I think Putin’s you know, as the -- the turn to the east you know, I think has become I think it’s maybe it would happened anyway but this acceleration of this relationship between Russia and China and personally between Putin and Xi Jinping you know, another anecdote in this story is -- is last year was it this year, but anyway I have a story that Putin and Xi Jinping were meeting in a Central Asian capital and Putin said you know, brought him a birthday present and his birthday present was a Russian ice cream, his favorite flavor of Russian ice cream, and I think Xi Jinping says, you know, you’re my best friend and you know, this is a relationship that has taken root.
Jason Bordoff: The -- I wanted to ask also about the impact, when you think of the impact of shale how the map has been redrawn one of the things that is also consequential -- you started and won the Pulitzer Prize for talking about the history of energy going back to the American obsession with imported oil from the Middle East, the role of OPEC in the market. The U.S. as we saw with President Trump during this oil price crash when it wants to talk to OPEC it now needs to call not just Riyadh, but Riyadh and Moscow --
Daniel Yergin: Yeah.
Jason Bordoff: And I think that is consequential from a geopolitical standpoint and I wonder if you could talk a little bit about the role Russia plays now in OPEC leadership and what that means for global oil diplomacy and geopolitics?
Daniel Yergin: Well, the trigger point for the collapse of oil prices in 2014, I mean it’s obviously there is a build up for supply there’s incredibly rapid growth in the United States, but is a meeting that I describe with then Saudi Oil Minister Al-Naimi and his Russian counterparts in one of those hotel rooms in Vienna where people meet, one of those suites and you know, and the Saudi minister said, we’re not going to cut back if others are not we’re -- we’re not going to just give up market share and the Russians said well we’re not on board and you know, walk -- and Naimi walked out, he gathered up his papers everybody’s stunned he walks out.
Two years later you have this oil price collapse it’s hurt everybody badly and you start to see the Saudi’s and the Russians coming together and out of that comes what we call the OPEC Plus which is Saudi Arabia OPEC plus a number of non OPEC countries, but the key one is -- is Russia and so I think there is this Saudi-Russian relationship it didn’t exist there before. I remember you know, seeing the state visit by the Saudi -- the Saudi king to Russia and it was you know, like Moscow was immobilized by the scale of it.
So, I think -- so that’s become very important of course it broke down during the -- the greater crisis that has come with COVID and a battle for market share and who resolved it, who was the deal maker, well that’s self-styled great deal maker Donald Trump and because what he was looking at was you know, as prices went down, headed towards zero, went to negative prices which is still a hard concept for people to get their heads around that it was really going to be very destructive of what’s become this important industry in the United States which is also important to -- in foreign policy and he was the one who you know, dialed not for dollars but dialed for oil and probably had more phone calls with Putin during those weeks in April than he had in his entire previous presidency and put together this deal.
And when he first said the numbers people scoff said it is impossible and yet it turned out to be an unprecedented deal. And it showed that was a graphic demonstration of oil market now being dominated by the big three U.S., Saudi Arabia and Russia. You know and you know, this is one of those things again that we just would not have been imagined and wouldn’t have happened without the turnaround in the U.S. position.
Jason Bordoff: Yeah because now -- now the changing map you talked about now and the oil price collapse you know, which used to be a clear net benefit for the U.S. economy --
Daniel Yergin: Yeah.
Jason Bordoff: is a little more complicated now --
Daniel Yergin: What’s a lot -- I think a lot more -- a lot more complicated because it used to be what was great, it was a tax cut you know, we saw at the end of the 1990s as stimulus to the economy, but now it really hits big parts of the economy as well. So, it’s -- it’s not as you know, it’s not clear cut and you know, it would you know, it would wipe out a you know, threaten to wipe out an industry.
Jason Bordoff: I want to move from Russia to China maybe by asking about the two you write in the book China needs energy and Russia needs markets, so explain what you meant by that and what the dynamic is and how it’s changing between Russia and China?
Daniel Yergin: Well, you know, China the growth in China of course as everybody knows has been extraordinary especially it was before that, but since it joined the WTO and beginning -- you know, beginning of the century and that means huge demand for energy for manufacturing you move 20 million people from countryside to city every year, you need energy for -- to build things, you need it for transportation, you need it to operate industry. So, China has a voracious appetite for energy. It’s the second largest GDP in the world and you know, at some point it overtakes the United States probably it’s the largest GDP in the world. And -- but China you know, it has a -- it has a you know, a strong oil industry of its own, but it’s still and it’s the fifth largest about the fifth largest oil producer in the world, but its demand is much larger. So China is now in a sense replaced us as the world’s big importer. It imports 75% of its oil and there is a lot of -- China ever since really the Korean War has seen independence from imported oil as a strategic problem if not a threat. And right now there’s always the issue of what is going to happen with Taiwan or other things in South China Sea and the Chinese worry a lot about the disruption of supplies coming through the Malacca Strait in tankers and through the South China Sea. And so the relationship with Russia is very important as a source of oil and it is a source of natural gas. And Russia and Saudi Arabia kind of vie to be the largest supplier of oil now to -- to China and of course the back story of that were during the Sino Soviet Split, decades ago Russia cut off its assistance in terms of oil and supplies. And -- but the Chinese at this point have really you know, this energy relationship has become very important to both countries. And so in “The New Map” one of the things I say is that a relationship that used to be based on Marx and Lenin is grounded in significant part today on oil and gas.
Jason Bordoff: And -- and energy is important for China not only because it uses so much and imports so much, but also from a geopolitical standpoint through how it thinks about its Belt and Road Initiative and its investment in other countries and what the geopolitical motivation is and consequence of that are?
Daniel Yergin: The scale of Belt and Road at least the putative scale is enormous 1. -- up to 1.4 trillion dollars which would about seven times in real dollars what the Marshall Plan was and it’s you know, Chinese investment, Chinese lending you know, making the middle kingdom kind of at the middle of the world economy. And it’s about infrastructure, it’s about markets for Chinese goods, it’s also -- very definitively about assuring more diversified supplies of energy that the -- the country needs. I guess Belt and Road is interesting because of course now after COVID and the impact on emerging markets, the debt issues of those countries will be very -- a very big problems in paying back Chinese the Chinese debt is going to be a kind of a big issue between China and those countries. But you know I have the -- the story in the -- in the book about when Xi Jinping met the President of Panama and Panama is not in Central Asia you just -- you can check the map you can be sure of that. And -- but he said you know, could Panama be part of Belt and Road and Xi Jinping said sure because the Belt and Road is about what the Chinese call connectivity and connecting the world economy.
Jason Bordoff: You mentioned debt and it is sometimes referred to as a debt trap, do you think that gives China enhanced geopolitical influence, is that part of the motivation?
Daniel Yergin: I think it become -- I don’t think in terms of the lending they’re setting out saying we want to lend money have people default and they will take over their ports or their city or things like that because I think the people who lent their money probably would then have egg on their face for having made bad loans, but I think that can be a consequence and there is one particular example of a Port in Sri Lanka where the Chinese have taken over because it was not a very well thought out plan and that’s a particular port where the Chinese controlled influence is upsetting or of concern particularly to India.
Jason Bordoff: And the U.S.
Daniel Yergin: And again -- and again you have to look at the map and you’ll see why.
Jason Bordoff: Right, right. I was going to say the -- the U.S. China relationship obviously is in a pretty I think it’s fair to say a bad place and I think it will continue to be quite a difficult relationship regardless of who wins the election here in the U.S. in November. Talk about these rising tensions between the U.S. and China and what do you think the risks are and -- and the implication might be for the energy sector, but beyond that?
Daniel Yergin: Well, Jason before I became totally obsessed with energy, my first book which grew out of my Ph.D. at Cambridge was a history it was called “The Shattered Peace” about the origins of The Cold War and I kind of thought well I am not really going to be writing anymore about origins of Cold Wars, but the last two years as I was finishing “The New Map” I really began to think I am writing about origins of new cold wars with Russia, but particularly with China and as I think as you suggest in the last few months, the -- the rift, the divisions, the tension, the acrimony has really mounted. And you know, and as near as I can tell what I call the WTO consensus that China been integrated with into the world economy was good for China, good for the United States, good for the world, that consensus was already breaking down before Donald Trump became president. And -- and now you have a really bipartisan critique of China that kind of runs across the political spectrum in Washington and a sense that you know, of rivalry and competition. The question is how to manage this?
So, we see China is trying to overturn the you know, or those who the critiques China trying to overturn the existing international order, the Chinese see it as you know, the West the United States are trying to contain them is to restrict them rising to what should be their role. And I think dealing with this is going to be a very important issue over the next few years because there is plenty of room for accidents to occur that things can spiral out and although this isn’t 1913 or 1912, you do have echoes of the -- the Anglo-German competition before The First World War and that you know, accidents do happen in history and sometimes as with The First World War they have catastrophic results. So I think you know and so I -- I kind of -- I ask people who are involved in this, but where this is going to go, how far does it go? And it just all seems mostly to be moving in one direction right now you know, Deng Xiaoping had his famous comment about Hong Kong now has an ironic ring to it, “one country two systems”. You know, are we moving to one world, two systems?
Jason Bordoff: That’s fascinating. I am -- I don’t want to spend the whole podcast just talking about the U.S. China relationship, maybe we’ll have you back to do that, but I want to -- I want to keep moving through the map to make sure we cover what’s in your book. The Middle East is the next region you look at and -- and as you mentioned just a minute ago you began studying energy in the wake of the Arab Oil Embargo when energy in the U.S. was an obsessive concern with imports independence on the Middle East and that view still lingers over policy debates and public perceptions in the U.S. even though we’re nearly self-sufficient in oil. What has the Shale Revolution meant for the Gulf producers and what it is going to mean moving forward?
Daniel Yergin: I think for the Gulf producers there are a -- a couple of things at work, but one of them is the sense that what is the nature of the U.S. commitment to the region is it mainly because of oil? You know, even before shale we were not importing actually that much oil from the Middle East, but it -- it was -- the oil was essential to the functioning the world economy from which we benefit so much. But I think you know, you saw the Gulf producers concerned is the U.S. here now it’s been overshadowed by the specter of Iran and what to do about Iran, but I think there is that concern and you know, you see that Saudi-Russian relationship and I think you know, one element of it was kind of hedging against the U.S. being less interested in the region. And I think you know, maybe even it was one of the factors, this may sound ironic because of the way it was done, in what we’ve seen is you know, the -- the reality of you know, The New Map of the Middle East that I write -- write about with the UAE and Israel and Bahrain making this agreement in Washington DC. And I think there were several elements in it, but one of them is -- is sort of I think the -- the UAE saying you know, let’s have a strong local regional partner dealing with what we see as the threats which is Iran and to a lesser degree Turkey.
Jason Bordoff: In other words, you’re saying the areas where several of these countries may actually have some agreement like they’re concerned about Iran, they need to --
Daniel Yergin: Right.
Jason Bordoff: they need to protect themselves because maybe they can’t depend on the U.S. to do it.
Daniel Yergin: Yeah, exactly at least they need to hedge and they need access to other technologies. I think nobody said this publicly, but Jason you’ll remember the shock you know, a little over a year ago with the Iranian drone attacks and app cake in Saudi Arabia and the kind of sense of vulnerability and of course the -- I think the U.S. has provided military assistance since then, but I think you know, the threat of drones as well as cyber you know, these new type of military threats mean that you need technology and of course that’s something that Israel had spend a lot of effort and a lot of brain power to deal with. So, I think they see a partnership in that as well as the kind of a jump start, a commercial jump start for -- for their economy.
Jason Bordoff: I think as you know there is a perception that Bahrain probably would not have agreed to this if Riyadh were not okay with it, do you think there is any possibility?
Daniel Yergin: I think -- Jason I think -- I think you could say that that perception is grounded in reality.
Jason Bordoff: Does that do you think there’s any possibility if Saudi Arabia could -- could normalize this relationship?
Daniel Yergin: Yeah, I think -- I think it’s complicated. It’ll be very interesting to see you know, where we are today, what the coverage over the next week or two and dialogue in Saudi Arabia is about -- about their relationship because I -- I don’t think this would have happened without that kind of approval. And you know, as I understand the word Israel wasn’t really used in the Saudi press in years past and we -- and I think it is now so you know, I -- I would say this is -- the maps and you know, when you look at them at least you really do look at it in terms of the maps going back to 1916 and going back to the Ottoman Empire the map is -- is being redrawn.
Jason Bordoff: We saw BP’s outlook this week, it suggests that peak oil demand maybe around the corner and that may or may not be right, but -- but leaving that aside the idea of peak oil demand and -- and this moves to your next map about the energy transition too. What does that mean for Gulf producers, how seriously do you think they take it, are they worried about peak demand, are they taking steps to diversify their economies in a serious way and how they are going?
Daniel Yergin: Yeah. Well, I think they take it very seriously I mean the discussion about diversification goes back you know, almost back to the oil crisis of the 1970s where suddenly all this money floated these economies. And I have a quote in the book from a senior Saudi saying you know, we’ve -- we’ve always had these plans to diversify and we’ve never gotten anywhere. So, I think now you know, you know, somebody in Riyadh or Abu Dhabi or elsewhere reads what BP is saying. They start to think even more about diversification and I think it has become a you know, a very big element about the need to diversify both because what’s going to happen to oil. And secondly because you have a huge number of young people who need jobs and the oil industry in itself doesn’t generate vast numbers of jobs it generates important jobs and it has secondary and tertiary job creation. So, I think it’s very much on the agenda you know, the diversification issue. COVID has thrown a real tension to the proceedings because it’s been very hard to proceed and it’s not easy you know, it’s not easy to diversify an economy. Abu Dhabi started in -- in 2007 and has you know, made a lot of progress, but Abu Dhabi is a you know, UAE you know, it’s a small population, it’s you know, other countries have much larger populations.
Jason Bordoff: The most visible reform it’s probably vision 2030 in Saudi Arabia, how -- how much stock do you place in that, how -- how plausible --
Daniel Yergin: Well I think it’s you know, I counted all the initiatives and all the plans in it and it’s a huge agenda and you know, I -- one sort of former Saudi official said to me, if we achieve 50% it will be fantastic. But so, I think the efforts there, execution is a huge challenge pacing a huge challenge and one of ironies of the whole thing is that in order to diversify your -- your economy away from oil, you actually need oil revenues.
Jason Bordoff: That’s yeah -- I think that’s right. And -- and they’re struggling with that right now in response to --
Daniel Yergin: Right.
Jason Bordoff: oil price collapse, the need to invest to diversify. The -- the last part of the book the -- The Map is how is the changing energy landscape energy sector transition and -- and climate change in particular because the word is changing and -- and the amount of attention that is brought to the urgency of the climate change challenge is -- is rising particularly in certain parts of the world. Just start with a bit of historical context, you write in the book I am going to quote again, solar’s assent has been extraordinary”. Solar is under two percent of electricity it’s around one percent of total energy consumption in 1979 there was a projection that solar could produce 20 to 25% of American energy by the year 2000 20 years hence. The problem that author wrote at the time was that solar inefficiency had yet to be given a fair chance against the entrenched conventional sources. And the author of that as you know was you in one of my favorite -- my favorite books of you, so --
Daniel Yergin: Well, that’s “Energy Future”, but let me say I mean that was a collective research project by the Energy Project at the Harvard Business School and I believe that particular chapter was written by somebody else. We were a little early I mean we got that gotten in the front page of the New York Times because we said the U.S. could become that conservation could be maybe almost important energy resource and that sounded ridiculous, but of course in a way energy conservation efficiency has been our largest new energy resource.
Jason Bordoff: So, I was just wondering if you could put the energy transition in bit of historical context one it is -- it is tremendous what’s happened with solar and batteries in the last decade, but when you look over a multi decade period it -- it took a long time to get going.
Daniel Yergin: Yeah. So -- you know I -- I start from the view that energy transitions are evolutions and happen over a long period of time. Now, I spent some time on the subject of Abraham Darby in Holbrookshire, England who -- and I even dated January of 1709 found that you could use coal to produce iron more efficiently than wood. You pointed out to me Jason we’ve talked about this that of course people started using wood a couple of centuries earlier -- coal a couple of centuries earlier because wood had gotten expensive, but it’s kind of thought well it was just heat for heat, but this was sort of a new level of efficiency so that’s why I kind of just historically to locate the mine and then it took two centuries for coal to become half of the total world energy supply.
Now, we’re not in the 18th century, we’re not in the 19th century we’re you know, going into the you know, moving along in the 21st century and we have incredible skills and technology and government policies and money and everything and just scientific -- talent to do things. But you know, how fast can it happen? So, I look at wind and solar basically both of those -- as modern industries were born in the 1970s, but it’s only about a decade ago that they really started to become competitive.
And I talk about the Shale Revolution and I -- but I talk later in the book about this solar revolution because fallen solar cost has been really particularly in panels has been huge partly assisted by Chinese manufacturing capacity where most of the panels come from, but you know, so we’re going to -- you know, renewable are certainly going to be you know, a big growing part of the energy mix going forward and that kind of counts as energy transition. So we’ll have gas competing with wind and solar for new capacity, but gas also the partner of wind and solar as you can see in California you need it otherwise you have brownouts when the weather isn’t right.
Jason Bordoff: So, you write about how long energy transitions take over history and that’s certainly is true and others have -- have written about that. And I -- I just want to ask about one consequence of that, if -- if this transition takes as long as past ones have, is given really failed efforts to try to reduce carbon emissions in any meaningful way over the last several decades a consequence of a slow and gradual transition is target’s like one and a half to two degrees sub warming Celsius are just -- are just missed. We -- we just don’t -- can’t achieve those given what the half of the carbon budget looks like. So, how do you view that tension how that plays out, do you think it’ll continue to be that slow and people will just accept that?
Daniel Yergin: Well, no. I think that you’re going to see like the Biden plan is two trillion dollars to spend on climate and you see what the Europeans where the President Urusula von der Leyen has said that that climate is the number one facing --
Jason Bordoff: In the European Commission --
Daniel Yergin: yeah the present European Commission the number one issue facing Europe, so we’re going to see a lot of resources going into that. I think that you know, I think that part of it you know, some people first thing they’re just not going to like it, but I think carbon capture has to be part of it in terms of dealing with it. You know, we have seen that U.S. emissions are back to where they were to be in the 1990s even though our economy has doubled by just replacing coal with natural gas primarily. So, but I you know, I carry away that at the end of the day which really going to be the solutions or is going to be technology and that means you know, the U.S. Department of Energy spends six and a half billion dollars a year on basic science that’s where the answers are going to come from and you know, they may surprise us. Now one thing that’s obviously on the agenda that was not on the agenda was sort of laughed about four years ago. It’s amazing to see how quickly hydrogen has become a subject now as being kind of part of the future energy mix.
Jason Bordoff: Yeah, I think driven by a recognition that electricity can decarbonize some parts of the economy, but probably not all parts of the economy --
Daniel Yergin: Yeah, that’s right.
Jason Bordoff: we’re going to need some other solutions we’re working a lot on that. As you know, the -- we talked about the U.S. we talked about Europe, you spend a lot of time looking carefully at -- at emerging markets around the world and those are the places where the energy demand growth is coming from and the energy -- and the emissions growth is coming from. How do you see in China, India, South Asia maybe even the emerging markets of tomorrow like Africa, is climate change an -- an important priority?
Daniel Yergin: Well, I -- I hear different things from there. I have a quote from the Nigerian Energy Minister saying, you know, it’s great what the Europeans are going to do, but what we need to do is get natural gas into our economy. We you know, we’re a poor country and I give the example I am on the think tank of the India’s energy ministry you know, as a sort of some you know, knowledge and insight into it. And for them, they have a huge problem is that people in villages use wood, animal waste and crop waste to cook and this creates indoor air pollution which the World Health Organization now famous for other reasons has called this single biggest environmental threat in the world. And so in India they certainly they want solar and they want wind and Prime Minister Modi has very ambitious goals, but at the same time they want to use commercial energy particularly natural gas to reduce their pollution to meet their needs and they get -- get propane to the villagers so that they’re not burning all that waste product and they’re not having their health problems. And so I think the perspective in developing countries is and emerging you know, poor countries is really different because they have different priorities. I mean if your -- you know, if you’re in India you look at the energy issues differently than you live in Netherlands or Germany and the climate issues.
Jason Bordoff: I wanted to try to bring all the maps together which I think is what you tried to do in a wonderful Saturday essay in the Wall Street Journal to talk about these major geopolitical powers around the world and then what would the energy transition mean for them. So, can you talk a little bit about sort of who the winners and losers are geopolitically?
Daniel Yergin: Right. Well, as I thought about it, it seems in certain ways China is -- could be the biggest winner because A) if it’s not importing large amounts of oil and no country is pushing electric cars faster than -- than China that deals with the strategic problem -- major strategic problem. And secondly, they’ve carved out leadership positions in what they call the new energies and you know, that you know, 70% roughly of solar panels come from China, they dominate the lithium battery chain, so they would be a big beneficiary. Now other people are now waking up to this and concerned about it. So -- but I do see China is a winner. I see you know, obviously Russia and Saudi Arabia given high dependence of hydrocarbons you know, could be you know significant losers here if they’re you know, depending on how fast this transition happens.
And I said the U.S. is kind of mixed that we have unique strengths which is our research our -- our eco system scientific research that nobody else has from the national labs to startups. And this kind of creativity and that can generate so much you know, but I also say you know, the U.S. has a you know, also has an ongoing interest in the vitality of its existing energy system. And that led me to just sort of you know, think about what happens if you know, if through regulatory force or something you know, you that was circumscribed that you know, that ban fracking actually took on you know, policy implications and then you know, led me to the ironic conclusion that actually a beneficiary of that would be Russia and Saudi Arabia’s oil exporters because they would fill the gap that would be created.
So, I think when you have to look at these things you have to look at them not in a static way, but dynamically how it will unfold over decades and there will be at different points the -- the correlation of things will look different, but there is you know, that there is an energy transition happening and I think you know, maybe to kind of tie it together, one thing I -- I you know, again it hits at you when you write and you sit down and think about it, but the Paris Climate Conference you know, historically will -- will turn out to be really impactful. And the way I see it is that there are two eras there’s when it comes to energy before Paris and after Paris. We’re now in after Paris and the conclusions of Paris have become the benchmark against which companies are being judged, investors are judging, governments are judging and so it’s really a remarkable consensus and coming together around that. And so that is -- that kind of conviction that kind of consensus is something that will be a motor to the energy transition in the future.
Jason Bordoff: Well, we have gone over time and we also did not have enough time and that’s just how much information is in this book and how richer book it is and -- and a wonderful read. So, congratulations on it. Thank you again for being with us today and -- and again just on a personal note a word of thanks from me since we met a long time ago through the association of Marshall Scholar Alumni you’ve been a -- a friend and a mentor to me and to the Center on Global Energy Policy. I think when I was considering leaving the White House to come to Columbia and start this, you were the one of the first people I called to talk that through with. And so I just want to say thanks for all you’ve done.
Daniel Yergin: Well, I think I have to say that being involved with the Center has really been a great privilege because I think from when we talked about it in terms of and what it does now and its impact and its range over the entire issues of climate, environment and energy, it’s making a unique contribution. And I have to say that it’s become a really a global force, it really is a -- a global center and so you know, I feel that it’s you know, much credit to you and your colleagues and the people who work with you to make it what it is, and so thank you for this opportunity to talk about “The New Map.”
Jason Bordoff: Thank you that’s deeply appreciated and thanks to you our listeners for joining on this episode of Columbia Energy Exchange. For more information about the podcast or the Center on Global Energy Policy visit us online at energypolicy.columbia.edu or follow us on social media @columbiauenergy, I am Jason Bordoff, thanks for listening, we’ll see you next week.