Daniel Yergin, the Vice Chairman of S&P Global, is one of the world’s most respected analysts of the politics and economics of the energy industry. He is the Chair of the famous CERAWeek conference, which convenes every year in Houston business leaders, policy makers, analysts, and media influencers.  Yergin is a prolific writer and his newest book – The New Map: Energy, Climate, and the Clash of Nations, has been described as “a master class on how the world works”. He is also the author of the Pulitzer winning book The Prize: Epic Quest for Oil, Money and Power now just out in a new edition and a new epilogue on the enduring lessons of The Prize – and for the first time as an audiobook.

 

What do you expect to be the main differences in energy policy between the second Trump administration and Biden’s energy policy?

The differences are substantial. Oil and natural gas production grew under the Biden Administration, as did LNG exports, especially to Europe. The invasion of Ukraine meant renewed attention to energy security. But the central focus of the Biden administration was on climate and that was an “all of government” mandate, whether on energy or transportation. The Trump administration will be focused on strengthening conventional energy production and advancing nuclear, as well as reducing regulations, which have grown a lot in the last four years. The incoming Trump administration has put a lot of attention on that. And it will focus on energy as an important part of America’s position in the world.

 

What are the main trends shaping the global energy landscape in the next decade?

I would say, among others, the rapid pace of growth in demand in the global south, growing role for LNG, increased role for renewables in the energy mix, renewed interest in nuclear power, and the struggle to find the balance between energy needs and climate policies. And we will see the impact of AI. Two big questions are what happens to energy demand and energy mix in China and India. China will play a dominant role in electric vehicles in much of the world.

 

Today, about 2 percent of the world’s total primary energy supply is accounted for by wind, solar and geothermal — what do you estimate this number to be in 2035?

Expect them to be more substantial.  The cost reduction in solar has been very dramatic, driven down by the scale of Chinese manufacturing, and wind technologies have advanced a great deal.

 

What role do you believe nuclear energy will play in the future energy mix?

It’s very striking to see the turn-around on attitudes on nuclear power and the growing conviction that it has an important role to play—whether conventional power plants, small modular reactors, or at some point, fusion. This shift is reflected in the fact that 28 countries have called for nuclear to triple by 2050.

 

Google, Microsoft, and Facebook are all exploring nuclear avenues: do you have a view on the never-ending Large Reactor vs. Small Reactor wars?

Conventional reactors are a long-established technology and industry. There’s a lot of focus on the potential for small nuclear reactors, whether with similar design to today’s light water reactors or different approaches, but the impact of SMRs will only become apparent in the next decade.

 

We used to imagine that any middle east war would send the oil market into chaos. A year on from the start of this latest war, conflict is spreading but energy market chaos hasn’t. Why? 

Never say never. Things could change overnight. But it is still notable that the markets have not reacted so far in terms of spiking prices as would have been expected in the past. I see three reasons. One is the shale revolution that I write about in my book The New Map. The United States is now, by far, the largest producer of oil in the world, and that is a stabilizer. The second is the existence of substantial spare capacity, at least at this time, on the Arab side of the Arabian Gulf. And third, is the weakness in the Chinese economy and the uncertainty about the future course of oil demand in China—which in previous decades was responsible for half the annual growth in oil demand. For, at least now, we are in over-supplied markets. But keep in mind that the supply-demand balance is not static. It can change for many reasons.

 

 

 

 

In which ways could this conflict still reshape global energy markets in the coming years?

The Middle East was headed toward an historic geopolitical rebalancing on October 6, 2023. Hamas’ attack on October 7 was aimed, among other things, at preventing that rebalancing. Whatever happens, the Middle East will still be crucial for world energy for many decades to come. And now Saudi Arabia and the UAE have a new competitive advantage—low-cost electricity.

 

The broad and fast adoption of Artificial intelligence has created a massive and unprecedented surge in energy demand. One AI query consumes up to ten times the energy of a standard Google search. Will the world produce enough energy o respond adequately to this booming demand?

At our CERAWeek conference in Houston in March 2024, AI seemed to come from almost nowhere to dominate the agenda. S&P Global estimates that data centers could be responsible for 7 to 10 percent of total U.S. electricity demand by 2030. That’s just five years away. That reality is one of the factors that has led to this revitalized focus on nuclear energy—led by the big tech companies. How this new energy demand will be met is a big question. At this point, it will be some mixture of natural gas, wind and solar, batteries, nuclear—and a new drive for technological solutions to reduce the call on electricity.

 

Many countries and companies, from Japan to big technology companies, pledged to reach net-zero emissions by 2050. Do you think they are regretting making the pledge?

I can’t speak as to how they feel! But please note that half a dozen countries that represent 45 percent of emissions do not have net 2050 goals, but rather 2060 and 2070 goals. We have just written a new article in Foreign Affairs on the theme as to why the whole idea of “energy transition” needs to be rethought. It’s not proving to be linear, as some scenarios propound, but multidimensional, with different countries at different rates, with different mixes of technology, and with different priorities. I think that there is a general realization that transforming what is currently a $115 trillion world economy in a quarter century is extremely ambitious. Extremely so—and estimates of costs are all over the place. The direction may well be clear, but not the timing.

 

 

 

 

 

How do you envision the future of major oil and gas companies? A generation from now, what will the major energy companies be known for? 

I think that a generation from now they will certainly still be in the business of providing oil and gas because the world will still be using substantial amounts of oil and gas. But these companies are at heart tech companies, engineering companies, and I think that they will have broader roles in delivering energy that the world will need a generation from now. I’m always struck by the fact that so many people don’t recognize that these are technology companies. They have scale and they have talent. But the road to the future is never straight.

 

How do you see the balance between energy security and environmental concerns playing out? Is pressure for decarbonization making Germany, South Korea, Japan and Taiwan weaker in the face of Russia and China?

Energy security fell off the table during COVID-19. Prices collapsed and so did demand. But it’s back on the table. Energy security is an enduring concern. Clearly governments have had to adjust their climate objectives in the face of energy security risks, and they will have to find a new balance. Japan has been the clearest nation in enunciating that need, but it’s an essential concern for Europe if it is to avoid deindustrializing.

 

How might the rapid growth of electric vehicles impact the oil industry and global energy dynamics?

So far at least the pick-up in EVs has been very uneven. According to S&P’s newest Pulse of Change, which tracks deployment of EVs. China is way ahead with over 50 percent of new car sales being EVs. Europe is at about 20 percent, and the U.S. at 10 percent. So, the biggest impact so far has been on the growth of Chinese oil demand, which is such a key factor in the global market.

 

How do you see impact of the prohibitive tariffs on Chinese EVs in Europe and North America?

Both the US and Europe are worried about a flood of inexpensive Chinese EVs capturing market share and damaging the domestic industries. That’s a particular problem for a country like Germany where the auto industry is so important. But Europe also has to worry about retaliation by China, which would affect the ability of European manufacturers to sell cars in China.

 

What do you consider to be the most significant misconceptions about the energy industry that persist in public discourse.

There are, no doubt, many. But let me mention three. First, not realizing how foundational energy is to overall economies and not just in transportation. Secondly, not understanding the mix of energies—that hydrocarbons are still over 80 percent of total world energy. And third, underestimating the complexities and timeline of the energy transition, as well as the difference in priorities between developed and developing countries.