April 15, 2024

On “Intelligence Matters” this week, host Michael Morell speaks with Global Energy Expert Daniel Yergin about energy security in the context of deep power rivalries and Russian President Vladimir Putin’s energy miscalculations. Yergin details the Biden administration’s efforts to promote more oil production while committing to its long-term climate agenda. And he warns against the substantial impact that any global disturbance can have on tight energy markets.   


  • Biden’s efforts to deal with energy crisis and climate: “It’s been a shock for the administration because it came in committed to one thing, which was its climate agenda and moving as fast as it can. Even though it is a very divided country, thinking it could do that. What it didn’t think about was an energy crisis. And already last November, suddenly you had the administration, the secretary of energy and the president saying to domestic industry, ‘can you produce more?’ Because they were worried about gasoline prices going into this November’s election. I think it’s been hard.”
  • Energy markets disturbance? “But when you look at the basic markets today, they’re very tight. There’s very little additional supply anywhere. And if you have any kind of disruption, and we’re living through a disruption right now because of Ukraine, it can send prices up again. There’s just very little give.”
  • Putin’s energy miscalculations: “You think about the miscalculations Putin made. He overestimated his army, underestimated Ukrainians. He thought the Europeans would say, ‘we’re so dependent on Russian energy, this is terrible, but let’s keep buying.’ And he thought the U.S. after Afghanistan, after January six, just can’t get its act together. So it’s been quite remarkable to hold this coalition together, and have it be as successful as it has been.”

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PRODUCER: Paulina Smolinski

MICHAEL MORELL: Dan, I want to start by mentioning a couple of the many books you have written and ask you a couple of questions about your most recent book. But I want to start with The Prize: The Epic Quest for Oil, Money and Power. So I read it when it was first published in the early 1990s,  

And I thought at the time that it was a terrific book, certainly among one of the best books that I’ve ever read. And for my listeners, it won the Pulitzer Prize. And I just wanted to say and I wanted you to know this, that my youngest son, who was trained as an economist, just read it in the last couple of months. And he promptly concluded that it was the best book that he has ever read. So I think it’s pretty cool that he and I read it 30 years apart. And we bonded over it just a few weeks ago.  

DAN YERGIN: That’s wonderful. That means a lot. And it is interesting that the book just has a life of its own. It’s like a child who grew up, moved to the house, went to college, and it just goes on. And so the fact that it connected with you then and it connects with your son now is very meaningful. 

MICHAEL MORELL: I actually looked at it on Amazon, and it’s still selling. It’s still selling very well. So, wow, that doesn’t happen very often, right?  


MICHAEL MORELL:  Dan, your most recent book is The New Map: Energy, Climate and the Clash of Nations. And I want to ask you a couple of questions about the paperback version, which came out in September of last year. In the paperback version, you wrote a sentence that says that Ukraine is the issue that is going to blow up between Russia and the West. You wrote at that time that what form that that blow up would take was not clear. But you said it’s absolutely clear that we’re headed towards a blow up. You wrote that a full of full five months before the Russian invasion. What led you to that judgment? 

DAN YERGIN: When I did the original book, which came out a year earlier, I had really been thinking the same thing. And it was just looking at the standoff between Putin, between Russia and Ukraine, the tension over it, and that Putin refused to accept that Ukraine was a separate country. That Ukrainians were a separate people. And you could just feel the tension  building up over that. And ithis was going to be what was going to blow up, because you could just see the trend of it really going back to the gas crises in like 2006. It was just piling up. And the whole battle where Putin did not want to see Ukraine orient towards the west and that, he regarded would happened in 2014 when there was the upheaval, and his favorite candidate fled the country as president, and he took Crimea. And it looked to me like just Crimea was just the first step in what was going to happen.  

MICHAEL MORELL: Dan, the other thing you wrote in your paperback was about the risk of a crisis in the South China Sea, put that in the context of Taiwan today. 

DAN YERGIN: It’s interesting, Michael, because when you were in the agency, part of your job was to look down the road and say, ‘what is going to happen? Where is the point of conflict?’ And I came to really focus on the South China Sea. And obviously now so much focus is on Taiwan. But the South China Sea is where U.S. and Chinese ships come close to colliding with each other because China claims the South China Sea as its own territory. No one else recognizes it. And China has turned islands or even where there weren’t islands, created islands and turned them into stationary aircraft carriers. As with Russia-Ukraine, there’s just a fundamental disagreement and a clash in a sense between national interests and security interests between two sides. Now we see it accentuating with Taiwan, with Xi Jinping making his great mission to bring Taiwan into Chinese sovereignty and just not recognizing that it’s a separate country. And it does have some parallels to Putin in Ukraine. 

MICHAEL MORELL: It absolutely does. Dan, Ukraine is clearly one of the factors that’s impacting global energy markets. I want to spend some time talking about those markets. You wrote a number of weeks ago that we’re in an energy crisis as serious as those that we suffered in the past, including the two oil shocks in the 1970s. Oil prices have eased a bit since then, but I wonder if you would still say that we’re in a crisis? 

DAN YERGIN: I think so. In saying we’re in a crisis point, my fervent hope is I’m wrong and that it will ease. And what we see now, that’s a new factor of central banks, which will become among the deciders on oil prices because of raising interest rates and the question of whether we’re going to have a recession. But when you look at the basic markets today, they’re very tight. There’s very little additional supply anywhere. And if you have any kind of disruption, and we’re living through a disruption right now because of Ukraine, it can send prices up again. There’s just very little give. When President Biden went to Saudi Arabia and there was this expectation that Saudi Arabia’s has this great gush of oil that it could provide. There’s not a lot of extra oil anywhere in the world right now. And Chinese demand has actually been repressed because of the COVID lockdown. So if they come out of that, that adds more. And this is all in the context of Europe announcing that it’s going to ban Russian crude oil in December and Putin counterattacking and launching a second front in the Ukraine war, in a gas war in Europe. I think it’s still highly risky. It’s good to see prices down, but that can turn pretty quickly. 

MICHAEL MORELL: What  are the characteristics of the crisis from a macro perspective? What defines it? 

DAN YERGIN: What defines it. First of all, it’s hard to say. It’s pretty amazing to have a crisis because just a little over two years ago, oil prices were not zero. They were actually negative. Now they’re down, but they’re still around $100 a barrel. What defines it is very tight supplies. You mentioned The Price before and it has hundreds of characters in that book. But sometimes I think the two most important characters, one is named supply and one his named demand. And that’s where we are right now. Demand has been quite strong around the world. And there’s been what I call preemptive underinvestment in oil and gas resources over the last few years, so that the supply, the available supply really hasn’t kept up with demand. You don’t want to run a global oil market at virtual capacity because it leaves no room for any kind of accidents or any other kind of events. I would say it’s a combination of supply and demand with the overlay of politics and geopolitics.  

MICHAEL MORELL: You’ve written that the market has been transformed from previously a global market into one that is fragmented. What did you mean by that?  

DAN YERGIN: It really goes back to the end of the Cold War and the end of the Soviet Union. Russia had always been a big producer of oil and gas, and it was integrated much more into the global system. And Russian energy flowed out of Russia. Capital and technology flowed into it. And it was a market that ran on the grounds of efficiency. People living on the East Coast of the United States would be surprised to know that a fair amount of Russian oil was coming to the East Coast to run in US refineries because it made the refineries more efficient. People basically thought about efficiency, just that these markets would be smoothly running. 

But now that’s changed. Putin has inadvertently, or maybe intentionally, probably inadvertently, because I think he underestimated the reaction to Ukraine- that Russia is being shut off from the western  economy. The Europeans are going to say they’re not going to accept Russian crude oil and then they’re not going to accept Russian products like gasoline, petrol and they want to back away from what was a heavy dependence on Russian natural gas as well. It’s a fragmented market and Russia’s markets will be in Asia, not in Europe. Europe was its most important market. You also have, of course, Iranian oil that’s constrained to the market, Venezuelan oil. It’s a market in which politics now looms much more than it did in what we maybe will look back on and say it was the age of globalization. 

MICHAEL MORELL: You also wrote on gas that previous crisis have focused on oil, but this crisis encompasses a broader range of fuels, even nuclear. Can you talk about that. 

DAN YERGIN: In the seventies and the other oil crises, this actually started with coal. This energy crisis did not start on February 24th with the invasion of Ukraine. It started in the second half of 2021 when there was the recovery from COVID and lockdowns. Economies were really starting to move. First, there was not enough coal. So China switched to natural gas, LNG, that created shortages in Europe. So Europe bid up the price. So it reverberated from coal to natural gas to oil and nuclear because Russia has a rather dominant position in the nuclear fuel cycle value chain providing nuclear fuels. We took for granted that Russia and the US would cooperate on the International Space Station. We took it for granted that on these kind of commodities that  the same kind of cooperation would just go on. We didn’t really worry about the security aspects of it. But now people are going to worry about the security aspects and that question of dependence on Russia, particularly as Russia pivots more and more towards that relationship with China. 

MICHAEL MORELL: Dan, you said something really important. You talked about a decline in investment in traditional energy sources as constrained supplies are part of the problem here. What’s the source of that underinvestment? 

DAN YERGIN: I think there were two things. One is actually returns on investing in oil and gas were not very good because in 2014 you had a price collapse and then you had a second price collapse with the COVID lockdowns. The other thing was the rise of what’s called ESG investing- environment, social, governance, – where people were saying, ‘well, we really shouldn’t invest in oil and gas, we should put pressure on financial institutions and investment firms not to invest.’ And so there was just less capital going into replenishing oil supplies and gas supplies.  

One of the things about oil and gas is they are depleting resources. Every year your stock production goes down maybe 5% and you have to replace it. And we just haven’t been replacing it. And that’s why these markets got so tight. In reaction, I think really to those two things. And now, what a change you see. You see the German chancellor flying off to Senegal to encourage LNG, liquefied natural gas investments in Senegal. It’s a real change. We do a big conference every year in Houston. I saw all these Europeans looking around for natural gas from the US, LNG.  

That has been a very important development because the Europeans now are looking to the United States for their energy security. In The New Map, I write about a lot about the shale revolution and the political and geopolitical consequences of it and how it’s really been a very important factor. And now the Europeans are saying, you know, ‘we really want to have substantial supplies of natural gas from the United States.’ And they’re counting on it as part of their energy security. 

MICHAEL MORELL: And this is all part of something else that you’ve written about at length, which is that deepening great power rivalry is a really important player in this energy market that we live in today. 

DAN YERGIN: I struggled in The New Map to find a way to describe it. And I came up with a term, it’s not a perfect term, but the WTO consensus, the World Trade Organization consensus, the notion that when China opened up, joined the WTO, that is a very high degree of integration in the global economy, including a much higher degree of integration than anybody in probably the United States and maybe China actually recognizes. The fact that when COVID hit, suddenly medical supplies, masks we have to get them from China. Many of our medicines come from there. There’s this high degree of integration. We were all in this together. We were all going to benefit from a growing, integrated world economy.  

I remember once somebody in Silicon Valley saying to me, ‘if you’re going to do a startup in Silicon Valley, you have to think about your China strategy, too.’ Well, no longer that. My feeling is it lasted until about 2015 is when things started to change. Of course, it started to change when Xi came to power in China in 2012, 2013. But by 2015,  I remember asking a Senator, ‘do you remember when you changed your mind about China?’ It was before Trump was elected. The WTO consensus is gone. No one wants to claim authority for it. There is the term great power competition, which of course has echoes of pre-World War One, which is disconcerting. The sense of strategic rivalry- it’s in the language of the Chinese and it’s the language of the U.S.  I don’t know if you have a feeling, as to when you felt that that change in attitude. But I would say around 2015. 

MICHAEL MORELL: To answer your question, I think views about China changed as they started to turn their economic power into political influence around the world. And when they started to change what was a focus entirely on economic growth, to a focus on regaining their lost influence in the world. It really began for me at the end of the Hu Jintao period when the national security team in China came to Hu and said, ‘we got to start using our power, using our influence.’ He gave them a little bit of room, and that was the South China Sea. And then when Xi came in, he gave them a lot of room. I think it’s that moment that really began to change views in the West. 

DAN YERGIN: Yeah. And that would have been around that period. One of the things that I went back to in The New Map, exactly when did the Belt and Road get developed and that China launched it in Nur-sultan University in in Kazakhstan, invoking China’s vocation as an imperial power.  The Belt and Road certainly became an embodiment- was it just an economic construction this thing, or was it indeed a political influence. That’s where we are today. The great problem for statecraft now is going to be how to manage the relationship between the U.S. and China in a way that stays competitive but doesn’t become more than competitive.  

One place where it really showed up, we just did a study on copper, because copper is the essential mineral metal that’s necessary for net zero carbon. It turns out that it’s even more concentrated than oil and 38% of copper comes from two countries, Chile and Peru. But what’s striking is that China has such a dominance in that supply, in that whole supply chain, as it does in so many of the other minerals. I think there’s a sense that geopolitical competition between the United States and China is going to certainly extend into this area of strategic minerals. 

MICHAEL MORELL: Back to the energy markets. We talked about how there’s been some easing in in oil prices. And certainly the same is true of gasoline prices. But one of the things that struck me when prices were at their peaks is that oil had been that high before, but gasoline prices had not. So it seemed to me that the gasoline market was even more tight than the oil market. Is that the case? And if so, why?  

DAN YERGIN: Yes, exactly. Oil, crude oil, you can’t do anything with crude oil. It has to be refined. And it turns out that as tight as the crude oil supplies in the world- and the technical term is that there’s such limited spare capacity that can be put into production. What’s even tighter is refining capacity, which is because refineries have been shut down, because they were not economic, or for regulatory reasons, or there’s pressure to turn them into bioenergy facilities. It turns out Russia was a very important player as a source of refined products. It provided a lot of diesel fuel and other fuels like that to Europe. So if half of Russia’s product exports shrink, that tightens the whole system. So refining is very tight. We’re still at that period where I can tell you that in in Washington and in Houston, a lot of concern. If you have a hurricane that comes along and knocks out a refinery or two, then we’re back in a really difficult situation in terms of gasoline supply. 

MICHAEL MORELL: Dan, that is exactly where I wanted to go next. You’ve written that the crisis could get worse. Besides hurricanes, what could make it worse? What could that look like? How bad could it get? 

DAN YERGIN: I’d like to put it in the context of not only oil, but natural gas. Because Vladimir Putin laid out his strategy about fracturing the Ukraine coalition, the Western Coalition at the Saint Petersburg International Economic Forum in June. He said, ‘high prices will create social turmoil which will lead to populist parties coming to power.’ And as he put it, ‘a change of elites in Europe’, in other words, ‘fracture the coalition.’ He’s manipulating natural gas supplies to do that.  

Now, Russian gas supplies to Europe are down about 70% from their normal level. Russia was providing about 38% of Europe’s natural gas before then. You’re seeing particularly Germany scrambling. The chancellor talked about maybe not shutting down their last nuclear power plants, which were slated to shut down. Fear of rationing and the equivalent natural gas prices in Europe now, if you put an energy equivalent, it’d be like oil at $380 a barrel.  

There’s where you could really see the crisis coming. And it’s a race right now. And the thing for people to watch is, are the Europeans able to fill storage? They need to put gas into storage for the winter. Can they get there or is Putin going to prevent them from doing that and they’re just going everywhere in the world to find it. They’ve restarted coal plants that were supposed to be shut down. Of course, a crisis in Europe, rationing in Europe, that would reverberate. It would affect all the energy markets and would affect the global economy. When you have the economics minister of Germany warning of a Lehman Brothers style contagion, if this thing goes bad, that tells you that there’s a lot of risks there. 

MICHAEL MORELL: And what do you think he meant by that? That was a really interesting thing that he said. 

DAN YERGIN: I think he was saying that a deep economic crisis in Europe would affect the global economy as severely as it had in 2008. In other words, really grave, something that goes beyond a recession. They’re already making plans for rationing gas in Europe. On the oil side, you have a calendar now. You have Europe saying, ‘we are going to no longer take Russian crude oil in December. So we have to get oil somewhere else.’  

Here’s the real twist. This is a clash between Europe and the United States. The Europeans want to put a ban on insurance and services for tankers that are carrying Russian oil. That means there would be a huge hole in the market, and where would India get its oil right now? So the U.S. is responding with the idea of a price cap that somehow you could just get everybody to agree that they will pay no more than, say, $40 or $50 for Russian oil. I think it’s going to be very difficult to make something like that work. I think this kind of dislocation that’s coming is also part of the seeds for this crisis getting worse. And obviously, so much of it right now has to do with the war grinding on in Ukraine. 

MICHAEL MORELL: The geopolitical question that flows from everything you just talked about is the ability of the United States to hold the anti-Putin coalition together when Western Europe is facing this kind of stress. 

DAN YERGIN: Exactly. Because Putin’s strategy, he is one leader who really understands the energy markets. People who would meet with him would be amazed by his detailed knowledge. He knows what he’s doing. Look what happened in Italy. There is Mario Draghi who went by train to Kiev to affirm Italy’s support for Ukraine, but now forced out by one of the right-wing parties. I think that’s his strategy. You think about the miscalculations Putin made. He overestimated his army, underestimated Ukrainians. He thought the Europeans would say, ‘we’re so dependent on Russian energy, this is terrible, but let’s keep buying.’ And he thought the U.S. after Afghanistan, after January six, just can’t get its act together. So it’s been quite remarkable to hold this coalition together, and have it be as successful as it has been.  I think as the economic hardship increases, pocketbook issues start to come into it. The party that brought down Draghi said that it’s terrible that Italians have to face a terrible choice between paying electricity or buying food. I think that’s Putin’s calculation, that this is not a short game, but this is a medium game. 

MICHAEL MORELL: Let’s shift to policy here. How would you characterize the administration’s efforts to deal with the crisis? 

DAN YERGIN: I think it’s been a shock. It’s been a shock for the administration because it came in committed to one thing, which was its climate agenda and moving as fast as it can. Even though it is a very divided country, thinking it could do that. What it didn’t think about was an energy crisis. And already last November, suddenly you had the administration, the secretary of energy and the president saying to domestic industry, ‘can you produce more?’ Because they were worried about gasoline prices going into this November’s election. I think it’s been hard. It’s been challenging then for them to pivot. They had very little dialogue with the oil industry. Contrast to Germany, where the economics minister, who’s a leader of the Green Party, is in tense conversation and in coordination with the energy companies. It doesn’t happen in this country. I think, the administration is trying to go down two different paths at the same time. It’s certainly not a smooth path because they came in not wanting to have anything to do with this industry that employs ten and a half million Americans. 

MICHAEL MORELL: They reached out to the Saudis, obviously, the president’s trip there, and did not get that much of a boost of oil production. OPEC Plus announced a very small increase in production. There was an outreach to Venezuela, which, quite frankly, I didn’t understand because Venezuela is not really in a position to increase their production much. They haven’t really been able to put a lot of additional oil on the market. 

DAN YERGIN: The fact was that there is not a lot of spare capacity, as it’s called, in the Middle East to put into the market. As we said before, there was this overestimation. Obviously, there were other reasons for that trip having to do with Iran re-engaging with the Middle East. There’s not been much of an outreach to Canada, to Alberta, which is a lot closer to the United States. There’s some dialogue with the domestic industry. And the one place in the world, they say, ‘where is production increasing?’ The one place in the world where production is increasing is the United States. The United States will add more new production this year than all the rest of the world combined. And without that, the position would be even worse.  I think it’s been complicated for them on how to handle this.  I think probably right now, gasoline prices coming down, is a source of great relief. One less thing to worry about going into the November elections. 

MICHAEL MORELL: But as you pointed out, something could happen to certainly reverse that. You talked about outreach to Canada. Is there more that the administration could be doing here? 

DAN YERGIN: I think that the most important thing is to understand the logistics of supply, how you move supply around. It’s a kind of a nitty gritty thing. Where are the bottlenecks? What can be done? There are actually supply chain problems that are affecting domestic U.S. oil production and what can be resolved about that. And the perennial questions around permitting, of just getting things done and getting them built. I think there’s some more, but the focus of the administration is still on its climate objectives.  

I think it’s been a real challenge for them. Just to take the president’s trip to Saudi Arabia. There were other reasons for doing it, as we said. But clearly, oil was very central to it. But right now,  they’re being very careful to say there’s not a recession. But the one thing that will take the pressure off the oil energy supply is, of course, a recession, which is not a very good way to solve energy problems. 

MICHAEL MORELL: Let’s look a little longer here. We have to move away from carbon and toward renewables. I’m wondering how you think about whether there is a transition that you can envision that can get us where we need to be on climate without serious economic disruptions? Or are we too late for that? What do you think? 

DAN YERGIN: A very interesting paper written by an economist related to the Peterson Institute in Washington says that if you try and push the net zero goals into 2030, you’re going to have economic disruptions. I think there is some further thoughts about that. I think the other side of it is, I mean, the direction is clear. The direction is absolutely clear towards decarbonization, lower carbon. But how fast can you do it? And I think that’s why we did this recent study, this new study on copper, because you need a lot of minerals. The International Energy Agency said we’re moving from a fuel intensive to a mineral intensive energy system. So you have to build a lot of things. An electric car, for instance, uses two and a half times more copper than a conventional car. You really have to look at the ability to provide the supply that’s necessary for that. I think we’re going to find that’s going to be more challenging. I think it’s recognizing that this is a longer process.  

One of the things I did in The New Map is I just looked at, ok, everybody talks about an energy transition, what is an energy transition. And I looked at all the other energy transitions, they unfolded over a century. And they weren’t really transitions. They were additions. Oil, discovered in 1859, overtakes coal in the 1960s as the world’s number one energy source. Today, 2022, the world uses three times as much coal as it did in the 1960s. So it’s energy addition.  

To say that you’re going to change the entire energy foundations of what today is an $88 trillion world economy and do it in 28 years. It’s a big, big, big challenge. I think we’re also starting to see there’s a new North-South divide where developing countries that say, ‘we have other imperatives.’ India is building a $60 billion natural gas supply system so that they can use less coal. That’s very different than what the European Union wants to do. And I hear from a lot of developing countries saying, ‘the West cannot impose your notions of how to do it when we have to deal with poverty and economic growth, too.’ I think that is becoming a further complication. The direction is clear. It’s one thing to have a PowerPoint, but it’s another thing to make things happen in this real complicated world in which we live. 

MICHAEL MORELL: Exactly. What got you interested in energy all these years ago? 

DAN YERGIN: I had a postdoctoral grant at Harvard. I was supposed to actually be working on the political economy of U.S.-Soviet trade. And that got less and less interesting. And then energy just exploded. And  I just became totally fascinated because it involves everything from geopolitics to markets to technological innovation. It’s sort of an all encompassing thing. And I just found it endlessly fascinating. And it never it never stands still. It’s always changing. So it’s just always very challenging to try and make sense and see where things are going.  I didn’t set out to say, ‘oh, this is what I’m going to focus on. This is what I want to do.’ But it’s just so fascinating and so important. 

MICHAEL MORELL: Just to maybe finish where we started, when I began at the agency in 1980, it was obviously the Iran-Iraq war and the second oil crisis as a result of that. And I was working on energy issues all those years ago, too. So it’s just a nice way to finish our talk here. Dan, thanks for joining us. It’s been a real pleasure talking with you. 

DAN YERGIN: Thank you very much, Michael. 

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