Our program with Daniel Yergin was a fine and appropriate conclusion to our three-part energy series with Exxon Mobil. We covered global gas; energy security in the context of supply, demand and pricing fundamentals with a twist of OPEC and natural gas; and now concluded with the quest for the energy our world needs. This is no small subject matter or challenge, and requires comprehensive knowledge and skill in conveying this energy meta-narrative.
There is no one better qualified to address this topic of “Quest” than Dr. Daniel Yergin, chairman of IHS Cambridge Energy Research Associates. Dr. Yergin is one of the most influential voices on energy across the globe and a highly respected authority on international politics and economics. Dr. Yergin earned a Pulitzer Prize for his classic history of the energy industry, The Prize: The Epic Quest for Oil, Money & Power.
His new book, The Quest: Energy, Security, and the Remaking of the Modern World, is considered a masterly work by most of the notable publications of our time—Wall Street Journal, the Financial Times, The Economist, and Washington Post, to name a few. To learn more go to www.danielyergin.com. Post-program, DCFR’s President spent a few minutes with Dr. Yergin:
DCFR: In a world with more natural gas—from expanded shale gas supply and other sources—how will it displace coal and oil?
Dan Yergin: Gas is going to be the default fuel in the U.S. for electric power. In Asia, there is a great deal of interest in more natural gas. China is interested in shale gas, and is stepping up its imports of pipeline gas and LNG (liquefied natural gas) imports. Japan will turn to imports of natural gas to compensate for the shortfalls in nuclear power. They will be importing more LNG.
In Europe, the European Commission with its low-carbon energy policies does not fully appreciate the role of natural gas and to some degree discriminates against natural gas. They are overlooking a major opportunity.
DCFR: Does this have anything to do with Russia’s actions in the past?
DY: Some could be because they are importing gas. But they have psychologically leapfrogged into a renewables universe.
DCFR: Do you believe the U.S. will ever move to a cap-and-trade system or implement a carbon tax? And if so, when?
DY: It’s off the agenda now. Climate change policies in the U.S. are indirect policies via fuel efficiency standards and renewable portfolio standards. The government is not using pricing as a policy tool in this matter but mandates. Cap-and-trade in the U.S. would be hard with the complexity of our energy systems, industries, etc. That high tide has passed. There may be a carbon charge in some form. One could say that gasoline taxes are a carbon charge. A more simple system is better.
DCFR: How will democracy movements in countries such as Libya, Syria, and Yemen impact OPEC and pricing?
DY: Yemen is a failed state—right next to Saudi Arabia—and that’s a security problem. Libya is not one of the heavyweights in OPEC. It still comes down to the big players such as Saudi Arabia, Iran, Venezuela and the Gulf Countries. Those are the dominant factors. Obviously, the turmoil coupled with the demographic issues of a youth bulge and high unemployment, is on everyone’s mind.
DCFR: What about Iraq?
DY: Clearly, Iraq has tremendous potential. It has always had this potential. Iraq had potential before Sadaam came to power, when he was in power, and after even. They are now organizing and focusing their efforts to bring production to a level that is commensurate with the availability and scale of their resources. Initially there were exaggerated views about how quickly they could do this. We could be looking at 5- 6 million barrels a day by end of the decade. But there are numerous logistical challenges to get this all done. Security will be an issue.
The Iraqis have had a very nationalist tradition in oil production but they understand they need international companies (not just Western firms), investment and technology. They have every incentive to do this fast. The Iraqis raised their reserve estimates a year ago, and within a week Iran raised its reserve estimates as well. That tells you Iran still wants to be number two in OPEC.
DCFR: What is your direction post-quest? What has struck your imagination for a future quest?
DY: I finished the book so recently, just in July. Normally a book like this would have been completed nine months before its publication date (Sept. 20). My publisher asked me to finally stop. The New York Times called the book alarmingly up-to-date. I have been listening carefully as I travel around the country meeting with groups. The two questions that often arise about shale gas and the Keystone XL pipeline. This shows where the public’s mind is, and also the larger question about U.S. energy policy. [Yergin has been working on a U.S. shale gas committee recently as well.]
I am so passionately involved with the book and its arguments, what I have learned, and sharing what I have learned. I am living the book every day. It is an ongoing dialogue that provides a framework for understanding energy. I am still very much on this quest.