Speaker 1:
From the library of The New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership, and vision and global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now welcome Inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
Over the last few weeks, I've found myself like many others spending more and more time back happily in New York City. My preferred manner of conveyance, like millions of daily commuters around the world, is the automobile. Traffic is still pretty light compared to the usual Gotham gridlock, but as the trips take a little more time each day, I'm feeling the world slowly reopen in my own little anecdotal way.
Josh King:
This was not the case back in April, that eerie moment out of The Walking Dead when the ring road around Atlanta is seen flecked with tumbleweeds, the world locked down and borders closed. Travel of any form back then was limited, strongly discouraged. The sharp decline in transportation and the consequent lack of demand for fuel was one of the factors that led to the price of WT oil going negative in that tumultuous month.
Josh King:
This topic is one that led our conversation with Daniel Yergin, vice chairman of IHS Markit and the Pulitzer Prize winning author of The Prize: The Epic Quest for Oil, Money & Power, who was a guest on our podcast the following month in May when he held court in conversation with our own Jeff Barbuto, ICE's head of oil sales. It's four months later now, the world still somewhat engulfed by this pandemic, has started slowly inching back to reality.
Josh King:
No, you won't convince my 13 year old daughter of that, not with three or four days of remote learning per week. And it's true, the impact of the coronavirus will continue to reverberate across our planet for years to come. And indeed the world as we know is made of echoes and murmurs of the past, such as the impact of history. And it's what Dan Yergin's newest book, The New Map: Energy, Climate, and the Clash of Nations, hinges on, how the past has shaped our present and how it's going to impact our future. At its heart is the global role of energy. Simultaneously, a Pandora's box, also a holy grail, which has driven nations apart as well as forging unlikely partnerships. Dan joins us today to discuss his latest book, climate change, the global pandemic, geopolitics and the hot topic in the US, the forthcoming presidential election. That's all right after this.
Speaker 3:
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Josh King:
Well, good morning everybody. Thank you for joining us. We're so excited for our conversation today with Daniel Yergin, vice chairman of IHS Markit. He's the distinguished author and public speaker, as well as the winner of the Pulitzer Prize for The Prize: The Epic Quest for Oil, Money & Power. Dan's careers has spanned journalism, academia, research, and business, leading him to become one of the foremost authorities on energy, international relations and economics. Dan's joining us today to discuss his newest book, The New Map: Energy, Climate, and the Clash of Nations, climate change, the global pandemic, geopolitics, and after last night, the hot topic in the United States, certainly the forthcoming presidential election. Dan, welcome back to The New York Stock Exchange. Welcome back to our Market Pulse series.
Daniel Yergin:
Thank you, Josh. It's great to be back and talking with you and glad to be on with everybody today.
Josh King:
Dan, the map brings us effectively to the present day discussing the coronavirus pandemic, the demonstrations in Hong Kong in May, 2020, as well as the unrest across the United States during the recent summer months. From an author's perspective with so much to process in just the last six months, how did you finish this manuscript and how did you do those last minute edits to make this most up to date as you finished that last page?
Daniel Yergin:
So Josh, normally you finish a book nine months in advance, your publisher takes it away, you see it nine months later. I was still working on this book on the second week of July. And at that point I would say Penguin, very politely took the book away from me, but it meant that I was able to bring this great tragedy that has shaken the world, COVID, into the book, both in a specific chapter called The Plague, which looks at the geopolitics, looks at the energy effects, looks at the question why people didn't see this coming, but also we went through the story and asked the question about how will this change the world when we come out of this?
Josh King:
So you ordinarily would've had this done nine months ago and sit back and watch that editing process unfold, but how is the pandemic going to affect us?
Daniel Yergin:
Well with me, I think the publisher knows that they wouldn't be done with me nine months in advance, because I would be continually keeping the book close to events. I think in some ways people are generalizing as to what the world will be like afterwards and there will be an afterwards clearly. But I think that, and it depends to what kind of recovery we have. One thing we know is that seven years of digitalization has been compressed into seven months and the way people work is going to change. That will affect commuting. We know international air travel will be the last thing to recover. On the other hand, we also see, and I think it's even seen in New York today, people would prefer to drive rather than take public transportation. So that's the other side of this, but I think so much will really depend upon the nature of growth when this is over and how deep the economic wounds are.
Josh King:
And in the introduction to your book, you indicate that there is a power play, perhaps even a tug of war between global energy needs on the one hand and geopolitics, both of which are impacting the worldwide landscape in different ways. Can you elaborate on what to you seems to be simultaneously this synergy as well as the dichotomy between these two forces?
Daniel Yergin:
Really that, Josh, gets the title because the title is about the new map and the new map is this interaction of energy and geopolitics. And a starting point for it is this remarkable revolution in the United States, which I think sometimes is not well recognized a significance in the United States, but the US have been gone from importing 60% of its oil to where it is today, which is the world's largest oil producer. That changes geopolitics as well. So there are positives there. China is buying oil and natural gas from the US as it does from Russia and many other people. But I think also the thing that's a great concern is that what I call the WTO consensus, which was this notion that China becomes part of a global system with the US, which former presidents talked about constructive relationships with changing China. That's over. Here in Washington, we heard some of it last night in the debate, Democrats and Republicans disagree about a lot, but the one thing you hear this consensus is the shifting view of China, that it's not a partner, but it's a strategic rival.
Daniel Yergin:
And you hear the same thing from China. So I think that notion of not globalization going away, but a more fragmented world, which you see it in terms of investment, you see it in terms of TikTok, Huawei and many other things, chips, and will affect energy as well. I think the other aspect of energy is that China is concerned about its dependence on imported oil. It imports 75% of its oil. It's a position the US seems to be and seems since the Korean War's dependence on imported oil as a strategic threat.
Josh King:
Continuing on in the introduction talking about China, but also Russia, Dan, you say that new Cold Wars are developing between the US and Russia, and the US and China, where energy is this key component of the conflict. But to what extent are these Cold Wars actually new or just a continuation through a different lens?
Daniel Yergin:
Well, that's a very good question and I use the term new Cold Wars advisedly because I wrote my first book on the origins of the Soviet, American Cold War. So I didn't want to rush into using it. And I say it's not there yet, but it is... I think it's happening. Clearly Russia and China are coming much more closely together. There's a wonderful book, a picture in the book of Putin and President XI making pancakes together, cooking something up. I've been at an event where they talked about they don't have enough time to talk to each other. And clearly one of the things they talk about is the United States and their common animosity and issues with it. I think as with Russia, there are many things that are just breaking down and Putin has done a great job of taking a country whose GDP is smaller than Italy's, somewhat larger than Spain's, and making it a great power again.
Daniel Yergin:
And China, of course, and this goes to all the financial market players will know this. I mean, most Americans don't really realize in their 401(k)s or their pension plans, they're Chinese equities, that's where they're getting some of their returns and growth. So a kind of rivalry and competition between China is really quite different than the Soviet, American confrontation, which was based on ideology and nuclear weapons because these two countries are so tightly tied together and both of them are so jointly embedded in the world economy. So it's a different kind of Cold War, but you certainly see over the last few months that relations have become much more tense.
Josh King:
A recent article, Dan, in the Financial Times uses this term punishment diplomacy to describe a tactic employed by China against countries that criticize its regime. This punishment diplomacy often impacts trade with a particular nation, yet sanctions can also be seen as an approved form of punishment diplomacy. And these have been going on for quite some time. Indeed, sanctions and embargoes were both features of the Cold War. So the question is, did the cold war ever end or did it just take a brief hiatus and is now reemerged with new players on a new frontier and under this new guise?
Daniel Yergin:
We know that the Soviet, American Cold War ended with really the breakup of the Soviet Union. And there were many unresolved questions in the breakup of the Soviet Union. One of the most important being the relationship between Russia and Ukraine. Is Ukraine in the Russian orbit, even though it's not officially a part of Russia anymore? And so, I think those fissures, Josh, I think you're pointed to that they were there, but they really erupted in 2013, 2014, when you look back on it and see what happened. And so, I think it's the unresolved questions about the end of the Soviet Union is, as you say, one thing led to another.
Daniel Yergin:
I think with China, it's how much had to do with change of leadership in China? How much had to do with intellectual property and the fact that China's economy has grown so much? And that it really, and by purchasing power, is already larger than the United States. Was it inevitable that they would become rivals in this way, that this hope that they would cooperate? I don't know, but it is, as they say that you go back in history, there is what's been called the Thucydides Trap going back to the Athens, Sparta wars in this century BC. That established powers and rising powers tend to collide often with bad results. So maybe some of this is structural too.
Josh King:
Dan, you got a wonderful review in The Wall Street Journal the other day, 'The New Map' Review: Tapping the Untappable. I want to shift from the far east in Russia to the United States because the review talks about we start in Dish, Texas, where George P. Mitchell, the son of a Greek immigrant for years, fanatically experimented with fracking at his gas drilling company until in 1988 his gamble finally paid off. When discussing the US, Dan, you indicate that the Shale Revolution is part of the road to the future. Yet, shale's been met with vocal criticism due to its reliance on Mitchell's fracking. What's the significance of shale to global energy markets and what are its redeeming qualities that people might not appreciate when they read the news every day?
Daniel Yergin:
Yeah, it's funny. Somehow it feels like if... in your different parts of the country, you get very different views of it. And in the Northeast, there's different... I'm just struck by it, but people will talk about all the environmental problems and you say, "Well, what environmental problems?" I was on the commission that President Obama set up to look at the environmental issues and it said, "This is an industrial activity. If it's managed properly, it's a very positive contribution to the economy." And Ben Bernanke has said it was like the most positive thing to the economy after the 2008 financial crisis. So there have been isolated instance, but there's this mythology around it about the environmental problems. But what it's done is it's created several million jobs. What it's done is it's created markets for manufacturing in the Midwest.
Daniel Yergin:
What it's done is it's led to over $200 billion in investment in new factories. What it's done is it's freed up US foreign policy. It's helped the balance of payments. All of those things have happened and it's kept money in this country, instead of having it going into the sovereign wealth funds of other countries. That's a lot of benefits that have flowed from this. It's interesting because we can talk about how Biden's handled the issue, but it's interesting if, quote, fracking was banned, it would basically shut down the oil industry in the United States because most wells today use some element of fracking and hydraulic fracturing.
Daniel Yergin:
If that happens, there's still 280 million cars in the United States that run on gasoline. There's still airplanes that run on jet fuel. There's still trucks that run on diesel fuel. The biggest beneficiaries of doing that would be the oil exporting countries, Saudi Arabia and Russia would love it because they would gain market share back from the United States and we'd be back with $5 gasoline. And once again, presidents would be saying, "We're going to try and be energy independent again." At least I don't think that Joe Biden wants to be the president who presides over the most rapid increase in US oil imports in history.
Josh King:
Yeah. I mean, he has been very careful to try to straddle that line and deal with people on the progressive left who would love him to embrace the Green New Deal, and we're going to get to that, Dan. Sticking on some of the great stories you pull into the book, I couldn't help but feel intrigued by this observation you make in chapter three when you describe this visit of Wang Jinshu, chairman of the Yuhuang Chemical Company to Saint James, Louisiana of all places in 2015.
Josh King:
He comes to Saint James because of natural gas and you write, "It was more economic for the company to take advantage of a pipeline that brought in shale gas, make chemicals in Louisiana and ship them to China, than to build a similar facility in China." Dan, we're so used to trade being the other way around, especially in manufacturing and electronics where so much of that comes from China to the US and indeed, from China all over the world. Has this visit to Saint James got any broader economic significance? Could the tides of trade ever turn when the US or even the rest of the world is providing China with its manufactured goods?
Daniel Yergin:
I'm not sure about its manufactured goods. Well, in a sense that petrochemicals are manufactured goods. Again, I was struck when I was writing the book to see how many non-US companies had built factories and were building factories in the United States because of the accessibility of inexpensive, abundant natural gas, and not well recognized. Again, there's that great picture in the book of when they also not only invested several billion dollars, but they also bought the old high school so that that parish could build a new high school. I think that's a positive thing to have that kind of interdependence. And as you're suggesting, Josh, having to go in both directions.
Josh King:
What I think your book does really well is explore this changing dynamics between which a nation dominated by the export or import markets of a particular fuel, be it oil or gas. For example, when discussing the supply of LNG, you quote Qatar's initial supremacy in that space, but also observed that Australia overtook Qatar in 2019. And then the US also joined the competition. Likewise, you note in 2018, the United States overtook both Russia and Saudi Arabia to regain its rank as the world's largest oil producer position it has lost more than four decades ago. Dan, these changing dynamics are a recurring pattern throughout the book. Tell us a bit more about how you mapped the ebbs and flows of trade dominance and how do these fit into the overarching theme of geopolitics?
Daniel Yergin:
I did think initially, I try to think back, where did I get the idea the new map? And I think initially it was just thinking about how would you describe how these maps of trade, energy trade, that people just thought was the way the world was going to be forever were really changing in a significant part because of what's happened in the United States, but also all that investment that was made in Australia. The very rise of the LNG business as a major global industry and all of these were about trade flows and supply chains. And then it became the larger metaphor of this changing map of the world.
Daniel Yergin:
And I think that, as the US is the Big Three in oil, it will be the Big Three in LNG, that comes with a lot of benefits that go beyond just revenues. And I've worked closely with the Indian government and for them, the ability to import oil and gas from the United States, I've seen it firsthand. I've been with the minister, been with the prime minister, talking about how important it is to them and how this brings a whole new positive dimension to a relationship between those, the US and China up, and US and India, which has been complex over many years. So that's just one example of the geopolitical.
Daniel Yergin:
The other example I tell in the book, I don't use it in the first person. I mostly avoid the first person, but I was at a program with President Putin and Chancellor Angela Merkel and I was given the opportunity to ask the first question. I was trying to ask him the perennial question that you talked to Russia about, what about diversifying your economy? But by accident, I mentioned the word shale and he started shouting at me in front of 3,000 people. Uncomfortable, but I realized that there were two reasons he didn't like shale. One is because it was competing with Russian gas in Europe. It was providing, along with LNG from Australia and Qatar and other countries, flexibility for Europeans, depoliticizing in a sense European gas, which might sound strange for somethings going on now.
Daniel Yergin:
And secondly, he sees shale as an adjunct to US foreign policy, giving the US an extra dimension of influence and giving it a flexibility in foreign policy. And Tom Donilon, I quote him, who was Barack Obama's national security advisor. And then, and of course, Secretary Pompeo, had both made the same point that US foreign policy is different when you're not importing 60% of your oil.
Josh King:
You mentioned interestingly that you don't use the first person much in your book. This review from The Wall Street Journal by Joseph Sternberg, which is so laudatory, does pull up that point, Dan. He writes, "Mr. Yergin's account is reportorial and supremely readable. No mean feet among geo strategy tones, but he's one of the world's foremost experts on this topic. The reader wishes he would insert more of his own views into the book." How do you struggle with that as a writer? Because you've been doing this for so many decades, people do really want to know what's in your head, but also what's in your heart.
Daniel Yergin:
Well, I think that's a very interesting question. When you do college literature courses, they call omniscient narrator. You want the historic sweep and if you keep talking about yourself, it changes. I think they are just one or two points where, like the study that I did with Former Secretary Moniz for the Bill Gates Foundation. I think I used, if not a singular first person, a plural first person.
Daniel Yergin:
I thought that was a very interesting point. I think my views are by the selection and the way I tell the stories, for instance about the battles over pipelines that are so important for the flow of resources. And clearly by highlighting the risks of this Cold War with China and saying, "We really need prudence on both sides not to get into a downward spiral." So I think my views are there. Maybe I was a little too diplomatic about it, but I think if you read as it unfolds and I think you recognize what I was saying. But as I say, I have an aversion to overdoing the first person singular.
Josh King:
Well, I will say after reading The New Map, also on my bookshelf or on my night table was the new book Rage by Bob Woodward in which suddenly this Washington Post reporter is very much a character in his own book. He's basically arguing with the President back and forth for the last third of the book. It did get in the way to understanding the repertorial narrative that he was trying to do, not so in The New Map.
Daniel Yergin:
[crosstalk 00:23:44]. Josh, let me say when I was... Because what I was really trying to do, as we're saying, it's a complicated new world and ideas that seem to be accepted three or four or five years ago about globalization, about energy markets and how it would all change. So what I was trying to do was is put a framework together of how these pieces fit, because of it is a different world and looking down the road saying, "Where's this new map leading us?" Good directions, less good directions.
Josh King:
I mean talking about that framework, Dan, you used the phrase energy security recurrently throughout the book. For example, when discussing relations between Russia and the European Union, yet energy security means for things for different parties. What does it mean to you?
Daniel Yergin:
Energy security to me means the avoidance of crises and big disruptions, I think I would put it that way. A good example, I had the list of what shale's done and I left out exactly what you just referred to, energy security. And here's a really good example. What is it? 13 months ago, Iranian drones attacked the largest single most important oil facility in the world, the Abqaiq facility in Saudi Arabia, knocked it out. If that had happened five or six years ago, we would've had panic and the futures price on ICE would've gone through the roof. Instead, there was maybe 18 hours or 36 hours. And then it was almost shrugged off, partly because the Saudis were able to repair it, but because of the existence of shale and that's given us a degree of energy security that we hadn't had for decades. So I think it's the ability to be resilient in weather disruptions and there are going to be inevitably disruptions that can come from all different directions.
Josh King:
I listened to one of the first episodes of Kara Swisher's new Sway podcast with The New York Times. Her conversation with Elon Musk, Dan. Tesla has become synonymous with electric cars and we've seen electric vehicles trickle onto the highways worldwide, but electric cars had this bumpy ride to inception when discussing General Motors' two seater EV1, which was launched in 1996. You write that how many people really wanted a gasoline-free car when gasoline was at the time, only about a buck 30 a gallon. But in our increasingly climate conscious world, Dan, one could argue that the future is electric. And I wonder then what do you think of other new fuels that are yet to take off in a big way, such as hydrogen and also compressed natural gas?
Daniel Yergin:
Let me first say something about electric cars. Quite right, I mean, automakers have basically thrown down the gauntlet and said they're going to move electric for a number of reasons, including in Europe, the pressure of they don't want to pay $40 billion of fines, which as I point out in the book, could be the case. Elon Musk has done an extraordinary thing. In the book I have a picture of him standing by his car and Thomas Edison standing by his electric car. And it's like, "Well, Thomas Edison didn't make it, but Elon Musk has made it." Electric cars are going to continue to grow and be part of the fleet. I think they're starting from a low base and there's... You point out consumers will have to want them or governance will have to create pretty powerful incentives.
Daniel Yergin:
Obviously, the Tesla has gone from being an electric car to being a brand and aspiration. And so, it's quite extraordinary what's been accomplished there. I think the fuel that we joked about a few years ago was hydrogen, about 15 years ago when Arnold Schwarzenegger was Governor of California. He talked about a hydrogen highway and a hydrogen highway ended up going nowhere.
Daniel Yergin:
The only people who really believed, I think, in hydrogen as a fuel and kept the faith were the Japanese. Toyota really has always liked hydrogen, but in the last couple of years, it has really moved to the fore. And in The New Map, I suggest it could be 10% of our energy mix in future decades. And you see the large industrial companies, oil companies, embracing that as a potential new technology, because it requires scale and engineering and they already work with hydrogen in their refineries. So I think hydrogen is certainly one of the things that could be significant in terms of the energy mix in decades ahead, not years ahead.
Josh King:
Dan, talking about governors of California, Governor Gavin Newsom, one of Governor Schwarzenegger's successors announced this week I think that the sale of gasoline powered cars would be banned in California as of 2035. Is this a precursor to other states and countries doing the same thing?
Daniel Yergin:
Well, I think certainly California sets the pace for other states. And of course, as the size of the automobile market, every automobile maker needs to deal with that reality. And other countries have already moved in that way, talked about it and you have cities saying that they'll ban gasoline powered cars in the future. And in Europe basically that's a goal too. So that's become a new benchmark. No new gasoline powered cars after 2035, at least in that state. Some people joked that they're going to set up auto dealerships in Nevada to supply the demand in California. There's an energy transition going on, a lot of money and a lot of effort's going to go into it. It's very much governed by what came out of The Paris Climate Agreement, but it's a scale of how fast you can do it. And one thing people are not looking at very carefully, it's something that... Research area for us at IHS Markit is, what does it mean in terms of the supply chains?
Daniel Yergin:
If you're going to, to just give one example, to achieve some of the goals by 2015 in terms of electric power, you wouldn't need capacity of wind and solar that together is twice as large as all the capacity that exists today in the global electric power industry. A lot of materials has to go into that. I say that maybe people have talked in the past about big oil. You're going to have to be talking about big shovels because it's going to involve a lot of mining and a lot of new supply chains, going back to our earlier discussion. But I think it's a pretty powerful statement coming from the Governor of California, if it can be put into effect because as you're suggesting, Josh, 15 years for industrial activity is not a long time.
Josh King:
And at the same time, either it by governmental fiat or the rigors of the supply chain, there's also got to be a commensurate uplift in consumer demand, which is still so dependent on fossil fuels as you write in about page 386. To what extent does consumer demand have to change in order for the world to become more green? And is there an indication yet on how COVID-19 will affect long-term demand?
Daniel Yergin:
Well, I think that automobiles, if you exclude light trucks, are about 20% of the world oil demand. People think cars are oil demand and there's a lot else of it, including medicines that people take is also oil demand and all the plastics [crosstalk 00:31:02]. And I think actually I was thinking that one impact of COVID is to demonstrate that there is something to be said for single use plastic bags after all, but rather deal with the pollution.
Daniel Yergin:
The way I think about it, coming out of this, you're going to have a tension between let's say, call it environmental ministers and finance and economic ministers. Those who want to push the use of the recovery to push more rapidly in energy transition and those who will be focused instead on the question of economic recovery, healing the economic wounds. I mean, one of the big things, Josh, and anybody who's... You walk down a street and you see it, it's what's happened to small business, which is 44% of private sector employment in the United States, there's a lot that's going to have to be rebuilt in our existing economy. So it's a question of where are the resources going to be? And governments are taken on an extraordinary amount of debt to deal with this. And if we get another stimulus bill in the United States, it will be more debt. So I think there are going to be tough choices in terms of where money is spent as we come out of this crisis.
Josh King:
Another stimulus bill is certainly probably upon in the continuing electoral game that we are playing for the next five weeks approaching the presidential election. Dan, the environmental and climate change has played such a big role in the election rhetoric so far, maybe not so much in the debate last night, but the talk of the Green New Deal calls for investigations into oil companies. Recent Financial Times article began with, and I'm going to quote it, "Energy will not decide the US presidential election just five weeks away, but the US presidential election will decide a lot about energy." How pivotal will environmental issues be in the ensuing debates after last night between the candidates and to the Times' basic question about the election deciding a lot about energy?
Daniel Yergin:
I think that's true. I think a Trump administration, Trump too, would continue the same kind of energy policies. He really likes the fact of the benefits that come to the US from what's happening in the energy front. Biden has his $2 trillion climate plan. But it was interesting last night that he made a point to say that the Green New Deal is not his plan. He has his $2 trillion and I think that he would probably have a mixed approach in terms of what he does on energy. A lot will depend on who's appointed and I can tell you right now, there's a lot of infighting within the rather large Biden campaign about what the stand should be, where almost the parties are fighting each other between you might call it the realist and those who are just focused on climate. So I think though that every cabinet department will have a climate agenda under Joe Biden if he's president.
Josh King:
And we will know the outcome of that maybe in five weeks and maybe it'll take another five weeks after that or five months to figure out the exact outcome of the election, Dan. I want to pivot now to questions that we've been receiving from the audience throughout our conversation. I'm going to start with this one, given storage volumes and demand uncertainty, when do you expect the dramatic drop in upstream capital investment to impact supply in a meaningful way?
Daniel Yergin:
I think that question points out something really significant that the major international companies who cut their budgets by about 30%, large independence by 50% or more, national oil companies have cut their budgets. And all of that means of course, less investment down the road, although also service calls are lowered and so forth. So I think you'll see the impact. If we have decent economic recovery, we see the impact of that around 2023. Take a couple of years, but we don't... Supply and demand haven't been abolished. It was one of the things I learned from writing The Prize with all those characters in the book, the two most important characters I still came to a conclusion are supply and demand. And so I think 2023 is a period when you would see impact.
Josh King:
Again, another question here, in what year do you expect peak worldwide oil demand or are we already in the permanent decline for fossil fuels?
Daniel Yergin:
Well, that has become of course a subject of much discussion. Different companies are talking about it, but even when they talk about it, they have more than one scenario for it. I think the view I still take in The New Map is not to generalize from where we are right now, but that it's probably 10, 12, 14 years away because of population growth in other countries, that Indian and China have different priorities and growth is really key to them. What I hear in other developing countries too.
Daniel Yergin:
To me, it seems, again, you need to think of scenarios because there's a lot we don't know. I only know of one major company that had a pandemic in its emergency planning toolkit actually. So we don't know what's going to happen, but I would work with that as a premise and then it's not a plummeting decline, but rather a decline that would occur then. That's when you've had growth renewed in China and India and other emerging markets.
Josh King:
You mentioned a company that had a pandemic in its contingency planning and you didn't name that company, but one person asks, which energy company in your opinion is best positioned to navigate energy transition?
Daniel Yergin:
Oh, I think that is what's being playing out on the stage right now as we speak, I mean, you see BP kind of leapfrogging ahead. You see the European companies seeking to rebrand themselves as energy companies go into electricity. I think all the companies, it's interesting, are more active in new technologies and venture capital, whichever side of the Atlantic that they're on actually. I mean, so I think that part is there. But I think time will tell. Obviously the European companies are under different pressure and different environments. I did a conversation with the CEO of Shell and the phrase he uses in step with society, in the society that he lives in or that Shell, that's home is Europe, which is different from society here. So I think there's a wide variation among them. On why one company had pandemic in its emergency planning is because they... Now CEO of that company had been in Singapore during the SARS epidemic and that left the lasting impression on him.
Josh King:
Here's another question. In aggregate, Dan, what criteria are OPEC using to plan for the return of the entirety of its production?
Daniel Yergin:
I think one criteria, they always look at inventories. They look at what's happening, production shot into the United States. But I think the real criteria are the two mega things, what happens? Well, the two Vs, the virus and the vaccine and economic growth. I mean, those are the two things that will really determine by what is the market saying to them?
Daniel Yergin:
And that goes back to that other question about, at what point do you see the pull up from the lack of investment? I think that until we see new shutdowns in Europe, Britain shutting down again, the sense that this is a long road until there's really more than one vaccine and not just available just to people on the front lines, but available to a wider population. Which at this point, experts are saying, the specialists, probably not until next summer. So I think until then it's going to be on and off again with the oil market and what OPEC does depending upon what the state of economies being open or shut.
Josh King:
One of our viewers asks Dan, "Will China, America and Europe ever meet the same environmental standards?"
Daniel Yergin:
Well, I think Europe and the United States are in the same ZIP code on environmental standards. China is in a very different situation. And when the Chinese talk about dealing with climate, my perception from the time I've spent there, that refers not only to the way we think about climate in the United States, the way the question was asked last night in the debate, they think about it in terms of urban pollution.
Daniel Yergin:
As you know and... well known, really big problems with urban pollution. And I think that's a big problem for this, call it the relationship with the growing middle class in China. It's proving pretty difficult. So China has half of the wind in the... All the installed wind capacity, half of the installed solar capacity, but it's still about 60% of coal economy and it's still adding three new coal fire plants a month, retiring older dirtier coal fire plants. So I think China has a longer road to go. And I think as we move into these supply chains for the net zero carbon economy, the kind of environmental questions now about oil and gas will be applied to the supply chains for the materials that are required for net zero carbon.
Josh King:
Dan, if I could aggregate some of the questions that we've received into one overall topic, they're asking how investors and companies can integrate ESG investing tools and data, particularly around responsible investing in climate analysis to employ new ways of understanding risk management.
Daniel Yergin:
I think that's a really big question. I was thinking that even the difference between last year and this year on ESG, despite everything else that's going on, how much more that has moved to the fore and it will continue to move to the fore. I think one aspect to what we did at IHS Markit, we were hearing from a lot of companies who were slightly tearing their hair out because they were getting so many different questionnaires about, are you doing this and that? And the questionnaires were contradictory. So we created an ESG reporting repository where companies can file their information and then we can sort it using artificial intelligence to make it easily available to investors so that they can evaluate companies.
Daniel Yergin:
I think virtually, most public companies now are going to... Most of the people on the exchange are having to adjust to the ESG requirements and questions. And so, I think that's going to continue to be there. And I find talking to CEOs to, boards and so forth, this is a big question about how do you address these in a systematic way that isn't comparing apples and oranges? And I think that's going to be part of the challenge for ESG over the next couple of years to get it in a comparative framework.
Josh King:
My final question will be from our audience, what are the key things that we should be looking at over the next three to five years? If we were, Dan Yergin, looking for a follow-up on The New Map: Energy, Climate, and the Clash of Nations, I guess, what'll you be working on next which might be an indication of what we should be watching next?
Daniel Yergin:
Well, what I'm going to be working on is this question of supply chains because I think it's totally fascinating. And you've got to integrate the geopolitics with economics and so forth, because I think you can have all the goals in the world, but if you don't have the building blocks and materials, you don't get there.
Daniel Yergin:
I think I would put at the top, the number one geopolitical issue is the US and China and how that's managed on both sides, so it isn't continuing to spiral. I think that's top thing. Obviously what the nature of recovery coming out of COVID will be. And then I think what technology delivers. There's a chapter in the book called Breakthrough Energies, listing all the technologies that we need in order to meet the goals that are out there and what comes in terms of technology and how fast. So those will be, I think, some of the things that I will be watching and paying attention to as we think about where does this new map lead us as we progress in the 21st century?
Josh King:
Dan, thanks so much for joining us today and our conversation at Intercontinental Exchange.
Daniel Yergin:
Thank you, Josh, for a great conversation and thank you everybody for joining us today as well.
Josh King:
And that's our conversation for this week. Our guest was Daniel Yergin, vice chairman of IHS Markit, and Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money & Power. If you liked what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us at icehousepodcast. Our show is produced by [Veronica Slumpko 00:44:24] with production assistance from Pete Asch and [Ian Wolf 00:44:27]. I'm Josh king, your host, signing off from the remote library of The New York Stock Exchange. Thanks for listening, talk to you next week.
Speaker 1:
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