Oil historian Daniel Yergin: Plenty of oil, risk in energy outlook

McClatchy NewspapersSeptember 20, 2011 

WASHINGTON — When Daniel Yergin published "The Prize," an 873-page exhaustive historical narrative about oil, in 1991, it changed how policymakers and academics alike thought about energy. His new book "The Quest," published Tuesday, is likely to do the same.

"The Quest," equally meaty at 804 pages, is broader in theme. It's subtitled "Energy, Security, and the Remaking of the Modern World." As with his earlier work, which won a Pulitzer Prize in 1992, Yergin relies on stories and vignettes to bring to life the changes and challenges that are taking place in the energy sector and the global scramble for oil.

Yergin, who's now an energy consultant, begins where he left off, highlighting the events now reshaping global politics and oil politics. The introduction covers this year's devastating tsunami and nuclear disaster in Japan and the Arab Spring, involving the collapse of strongmen across the Middle East and North Africa.

"I was really struck that here are two very major sets of events, very different, halfway around the world but each of them with major impact on what our energy future is going to look like. Both of them came as surprises, and yet we will be for many years assessing and living with the consequences," Yergin said in a lengthy interview with McClatchy ahead of the book's release.

"The Quest" covers everything from the peak oil theory, which holds that the world's oil production is in or near a permanent decline, to renewable and alternative sources of energy. It took Yergin five years to write it, and even in that time frame much changed in the energy sector.

In that five years, oil prices surged, Wall Street began treating oil contracts as prize investments, new technology boosted natural gas production from shale oil, and crude oil produced from ultra-deep drilling in the Gulf of Mexico began supplanting imported oil from the Middle East. And of course, there's demand from China.

"One of the things that surprised me was China. China hardly appears in 'The Prize,' because China was not a factor in the world oil market," Yergin said. "China in 'The Quest' is the only country that gets two chapters. And it's very much a narrative explaining how energy and oil have evolved as part of this larger story of China's emergence on the world's stage."

"The Quest" ends on the unfolding prospects for the electric automobile.

"Around 2008, the electric car — which has a very long history — started to gain political traction and political support. And companies started to get behind it. So the book really concludes on the future of the automobile — what will we be driving in 10 or 15 years? — and it's not clear yet by any means, and I don't think it will be clear until after 2015 or so where the electric will fit in," he said, concluding himself that "at least our personal transportation is going to have a larger electricity component in some form."

Here's more on what Yergin thinks.

Q: "The Quest," as a title, is a metaphor?

A: I think that there is really a huge challenge. We have a $65 trillion world economy. If we get back on track it could be a $130 trillion economy by 2030, in just a couple of decades. And the question is, "What is going to be the energy system? How are we going to provide the energy that an economy of that scale needs, and at the same time how are we going to ensure the security of energy and reconcile our energy needs with environmental questions?" I found those were the underlying issues that I kept encountering as I wrote the book.

Q: Why do you see the Arab Spring as so important to the future of energy?

A: I think this is a major shift, because what's happened is the strategic balance of a substantial part of the Middle East — and after all Egypt is the most populous Arab country — has been upended. And we don't know what the new balance is going to be. We see Turkey playing a very aggressive role in the region. There's been a kind of detente or stability in the region; we don't know if that is going to last. Attention has been diverted from Iran's nuclear program. ... I think there is going to be alarm about that, and I think attention is going to come and be focused on that. So I think that there is a sense of a higher degree of risk through the region, as well as uncertainty, than there has been in the past. And it is the region that still has 60 percent of conventional oil reserves, so I think that will be reflected in (future) oil prices.

Q: You think China is a wild card across the energy spectrum?

A: One of the things I talk about in the book is what I call the globalization of demand, which means that instead of energy consumption being concentrated in North America, Europe and Japan, it's in the emerging markets. And China is at the lead. China now consumes more energy than the United States. And so what happens to China, where China goes in terms of selling tens of millions of new cars, where its industry goes, that's going to have a very major impact on global energy markets.

Q: Is the world "running out" of oil?

A: This current issue of peak oil is really the fifth time the world has run out of oil. The first time was in the 1880s. The last time before this time was in the 1970s, when we were going to fall off of the "oil mountain." And instead, oil production has increased by 30 percent. So we see a lot of new resources coming in. And one of the big surprises is that we're seeing a turnaround in U.S oil production. We're not going to be energy independent, but we're seeing an increase in production in this country.

Q: How "oil independent" are we?

A: I think our oil imports have gone down from about 60 percent of our supply to 47 percent. That's partly because we are more efficient, partly because we have some ethanol in the fuel mix and partly because we've had this turn-up in domestic production. It still means we're importing oil. It means we're importing a lot more oil from Canada, less oil from the Middle East, so that the balance is changing at the same time. And so it does bring more energy security. But still, when you look at the world and what has happened in the world, we're still part of this global oil market with all the risks that are there.

Q: You seem optimistic, when analysts fear hoarding and conflict over future oil supplies.

A: A lot depends on political leaders, and a lot depends on events. You know, as a student of the energy field, I am just struck again and again how much surprises happen that only afterward people go back and look at it and say, "Of course. How could we not have seen it? How could we not have thought about the risk of tsunami? How could we not have thought that the shah of Iran's regime was going to collapse decades ago? How could we not see that Saddam Hussein was going to invade Kuwait?" Yet all of these have effects. There are also positive effects in terms of technology. The shale gas revolution has really taken people by surprise. It wasn't clear until 2008 what was happening, and now shale gas is 30 percent of our natural gas production!

Q: What do you think a reader will find surprising?

A: I think a lot of readers will be surprised by the notion that we're not running out of oil. That the issues involving oil are big challenges underground — to produce and find the reserves — but there are big risks aboveground: geopolitics and what happens in different parts of the world and government policies. I think the story about climate change, I was not trying to take sides in the debate, I was trying to tell a story, and I think people will find that story very original and not a story that they'll know. And it's really quite colorful.

Q: You also address climate change, but avoid taking sides?

A: Partly what surprises you when you are writing a book is to find what you end up doing much more about than you had thought. I had a question: "How did climate change go from something that just a few scientists thought of to being this dominating issue?" So I thought I'd write a chapter on it, and I ended up writing about five chapters. It's very narrative, very "storytelling." It starts in the Alps in the 1770s, which no one would have expected.

Q: Have your views on the issue changed?

A: No. I think it's clear; it's recognized that carbon is going up. Obviously there is a debate about the accuracy of the models and how fast things are happening, and I try to convey that. I am trying in a sense to tell a story and show that debate. But the notion that the kind of modeling of climate came out of the mathematical work that was done to develop the atomic bomb in World War II is something that most people would never have thought of.

Q: You see a future for renewable and alternative energy, but what future?

A: Based upon what we can see today and where the technology is probably in two decades or so, the energy supply system will look pretty much like the one we have today in terms of oil, gas and coal being the predominant sources. But we will see continuing growth of renewable and alternatives, but the overall size of the pie will continue to grow. I think after 2030, that's where we can start to see real changes and the real impact of innovation.

Q: How did writing this book differ from "The Prize"?

A: In a way, "The Prize" was kind of a chronological narrative with a lot of stories around that. This book is a series of narratives, many of them moving in parallel. So you are putting the panorama together of these different sets of stories. And I think at the end, I hope, the reader has a framework and a way of thinking about energy, and also has found that they've learned a lot from it but have also enjoyed it because there are a lot of characters, and a lot of stories and a lot of surprises.

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