Dan Yergin on Energy Security, Being An Entrepreneur, Advising U.S Presidents & His New Book

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Joseph Cass

Hello, and welcome. My name is Joe Cass. I'm a Senior Director here at S&P Global Ratings. I'm the host and the creator of the FI15 podcast. So today, we've got a very special episode. So this one is a one-on-one with the Vice Chairman of S&P Global, Daniel Yergin. So Dan is a Pulitzer Prize winning author, successful entrepreneur. He's an acclaimed speaker, and he's also, of course, a renowned energy expert. Today, we're going to talk about Dan's newest book, The New Map, him building a business and meeting U.S. presidents. Okay, Dan, welcome, and thank you so much for joining.

Daniel Yergin

I'm very glad to be with you today, Joe.

Joseph Cass

Fantastic. So first off, Dan, I've given you kind of just a smidgen of an introduction there, but it would be really great to hear a brief history of your career thus far in your own words, including highlights, but also any lowlights, too.

Daniel Yergin

Doing it very briefly. I started off doing a PhD. I was a postdoctoral fellow at Harvard. I taught at the Harvard Business School. And what I really did is I fell love with kind of doing research around energy issues, and with a colleague started a company, that company became Cambridge Energy Research Associates, and then it became part of IHS and IHS Markit, now part of S&P Global.

And I've been able to do, I guess, about 6 books and 2 BBC PBS series and being deeply immersed in kind of energy and all of its ramifications, and that's what brings me to today. And I guess, in a way, The New Map brought all my research interest together in one volume because it is very much, as I say, in the very first sentence, about the changes in energy and geopolitics.

Joseph Cass

Fantastic. So Dan, I read that you graduated from Yale in the late '60s. And I heard you were a member of a society there called the Pundits. So first of all, did you enjoy your time at Yale? And secondly, could you tell us a bit more about the Pundits?

Daniel Yergin

Well, I enjoyed -- yes, Yale is a great place to be. I mean, obviously, I focused on studies, but I thought the most important thing was to be a campus journalist. And so I started a magazine that still goes today that has turned out a lot of very prominent writers over the last several decades.

The Pundits was just one of these undergraduate things where people got together and we were supposed to, as I remember, tell, very long jokes, but that's a long time ago. And then I went from there to Cambridge, which is where I did my PhD and really became deeply immersed in doing what I really like to do, which is I really like to do research.

Joseph Cass

Excellent. So Dan, you've mentioned it in the previous questions, but I did want to dedicate kind of a big chunk to talk about your most recent book, The New Map: Energy, Climate, and the Clash of Nations. So could you give us an overview of what the book is about, why you wrote it and also some of the key points you think viewers and listeners will find most interesting?

Daniel Yergin

I think what drove me to do it initially was simply looking at physical maps and seeing how the maps of world trade were changing. The U.S. politics have been dominated for decades about being the world's largest importer of oil. And suddenly, the U.S. was becoming an exporter of oil. And suddenly, the U.S. was exporting liquefied natural gas, LNG, to other parts of the world.

And so the basic fundamental maps of world trade and energy, these huge commodity businesses was changing. And at the same time, I realized that the map of, shall we say, of geopolitics was changing as well. So I think one area I focused on was Russia, natural gas, Europe, Ukraine. And I think it's gotten attention because I said that Ukraine was going to blow up this issue between Russia and the West.

I focused on something that might seem peripheral, but how did the South China Sea become such a major issue between China and the United States and other neighboring countries of the South China Sea. And then certainly looked at the changes in the Middle East, which are quite radical and tie into energy and geopolitics.

And then the last part was the new map around climate and energy transition and the advent of the electric car. There's an extraordinary story about a lunch between Elon Musk and a young man in 2003 that's changed the course of the world automobile industry. And the question that's very much on the table today, how to think about energy transition.

So I think those are the subjects that I map in The New Map. And I want to say, I think the section on energy transition is one I really call people's attention to because that phrase gets thrown around anywhere you go in the world today, people talk about the energy transition. But it's important to realize how different this transition would be from all the energy transitions that have gone before back to January 1709 when the original energy transition began.

Joseph Cass

Excellent. So Dan, you've kind of gone through it there, but you do split the book into various deep dives of the new maps, so you've got the America's new map, Russia's map, China's map, maps of the Middle East, road map and the climate map, which you mentioned just then. And I wanted to do a bit of a kind of our own deeper dive into these, starting with America's new map. So what themes do you explore in this section of the book? And how is America's position in the world evolving?

Daniel Yergin

Well, there are two parts to that question. One is the shale revolution. And as somebody who's -- in addition to trying to look forward in terms of energy, I also kind of think of myself as an economic historian. Things that seem inevitable often start with contingencies and one person having an idea and being able to act on it.

And that's certainly the case of the shale revolution, which was considered impossible according to the textbooks and petroleum engineering and one man pursued it for about 20 years, man named George P. Mitchell, it was his own company, but he didn't own it, but he had the class of stock that enabled him to control the company.

People told him he was wasting his money, said it's my money, if I want to waste it, I will. And now it's something that's really transformed the map of world energy. And I'll just give you one story that's in the book, which is an exchange I had with Vladimir Putin about shale gas. And I was at his conference in St. Petersburg International Economic Forum in about 2013. And I was -- he was up there with Chancellor Merkel and I was told to ask the first question.

So I asked the first question, was asking about overdependence on oil and gas revenues, but I said shale gas and he started shouting at me in front of 3,000 people about how barbaric shale gas is and how terrible it is. And I realized afterwards is because it would compete with Russian gas and it would augment U.S. influence in the world.

And look what's happening today, U.S. LNG based upon shale gas is now one of the foundations of Europe's energy security. I think that really drives home the impact that the shale revolution has had on world politics.

Joseph Cass

So Dan, something you also discussed in The New Map is the future of transportation through an energy lens. So what could be the potential impact of ongoing changes in transportation, the raw materials required and how countries are positioned to potentially handle these changes?

Daniel Yergin

I think if you think back, and I mentioned that lunch in 2003 that Elon Musk had with this young man named JB Straubel, who was trying to sell him the idea of an electric airplane and Musk said, I'm not interested. What about electric car? Yes, I might be interested in that. We have Tesla.

A few years ago, Musk said, if I hadn't had -- if that lunch hadn't come about, there might not have been a Tesla. But look, something that seem dead and buried, the electric car that had died with Thomas Edison at the beginning of the 20th century. Now, every automaker is rushing to be a player in electric cars, driven partly by technology, but I would say more so really by government policy, whether it's in China, where about 30% of the new cars sold now are electric cars. In Europe, where it's about 20%, in the U.S., where it's between 8% and 9%.

But all the automakers are rushing in that direction and very ambitious goals. But I think what they're running into, and it's something that we're looking at, at S&P Global is the raw materials that are necessary for it, the minerals that are necessary for it. A new car -- an electric car uses 2.5x more copper than a traditional car. So the question is where are the minerals is going to come from.

And you see today automobile makers trying to integrate upstream to, in fact, participating in lithium mines. They didn't use to -- backward integration like that. So I think there's a growing anxiety about the availability of the minerals that are going to be necessary for the scale of the EV, the electric car revolution that's envisioned. And you sure get a lot of comments from a lot of governments, including EU, British, U.S., Japanese, Canadian, all expressing great alarm as are the minerals going to be there, and by the way, who's going to own those minerals.

And if I can just say something about this S&P study, we spent 8 months looking at copper, which is the metal of electrification. And electrification is a lot of what the energy transition is supposed to be about. And we concluded that in order to meet the goals, the kind of 2050 goals that are out there, copper production would have to double in a decade or 1.5 decades. And then you just look at it and where is the copper produced and you say, how is that going to happen?

Joseph Cass

Yes. Very interesting. Dan, you've already mentioned energy security, but I'd be interested to know what your view is on the future challenges nations may face when trying to maintain this energy security whilst at the same time, trying to ensure their own long-term path is actually sustainable.

Daniel Yergin

Right. I mean it's very interesting. It strikes me that the subject of energy security, which was kind of very strong for decades, the concern fell off the table in Europe. I think it fell off in the table of Europe because it was -- became very comfortable depending upon inexpensive large volumes of Russian gas.

I think it fell off the table in the United States because of the shale revolution. The U.S. was no longer energy -- a major energy importer, it was an exporter. And now China did not forget about it because it imports now about 75% of its oil. And Japan has never forgotten about it, and Japan is the strongest voice on energy security.

We saw that recently at this G7 meeting in Japan, where they changed the language about energy, reflecting Japanese concerns and now German concerns. So energy security is now on the agenda along with energy transition. And it's one of the things that complicates the situation because there's Germany, the greens, the environmental party leading the charge to get LNG importing terminals approved in a few weeks instead of taking 7 years or forever.

And so I think that I can see -- we can see it in the United States, we had the Secretary of Energy at our big S&P Global CERAWeek conference. We had 8,600 people. And we had the secretary -- the Secretary of Energy 2 years in a row, telling U.S. oil and gas producers, can you please increase production? So I think the industrial -- the governments of the industrial countries are really struggling to find the right balance now, realizing that you can't just assume energy security out of thin air.

Joseph Cass

Absolutely. Thanks, Dan. So Dan, you've been discussing energy in all its facets over the past 40 to 50 years. So given your knowledge and also your network, at what point do you think there will be a successful net zero transition? And what could that world look like?

Daniel Yergin

Well, I think it's gotten hazier actually. It looked easier before COVID, if you went back 4 or 5 years, I think there are some -- I did a paper for the International Monetary Fund, and they titled the bumps in the road to the energy transition (sic) [ Bumps in the Energy Transition ]. One is energy security. The second is the scale of the task. The third is, I mean, a $100 trillion world economy, transform it in 25 years. It's a pretty complicated thing to do. You need a lot of different supply chains.

And by the way, some of those supply chains collide with this new era of great power competition. And there are 2 other factors that I think are important. One, you've already pointed to, Joe, which is minerals, the availability. 3 countries produce 40% of world crude oil, Russia, the United States and Saudi Arabia. 2 countries, 40% of copper, Chile and Peru. And the President of Peru is in jail and the President of Chile is not really very excited about mining.

And then finally, and this loom is really large, is a new north-south, a developed versus developing nation view of energy transition or as the former Energy Minister of India called it, energy transitions plural. And we are doing a big study called the Global Energy Solutions Initiative trying to bring in the voice of the developing country where 80% of the world people live, and they have other priorities, too, reducing poverty, economic growth, health and so forth.

So I think those are the things that complicate it. And while there is the 2050 goal is generally embraced, I get a little confused because China's goal is 2060, Indonesia's goal is 2060, India's goal is 2070. So I think the direction is clear. But I think how you get there and when you get there is going to be more complicated. And even the International Energy Agency has said that roughly half the technologies you need to do this aren't there.

So I think we're still going to have an energy mix, certainly, renewables will be a bigger role. But I think oil and gas will be part of it for a long time, although you're going to need abatement as it's called. But all strange things are happening. We know there's Brent oil and there's WTI. Now, there's a new form of oil go by the initials UCO, used cooking oil, is now a traded commodity fuel.

I was talking with the people who run the storage tanks and they say, "Oh, we store oil and various liquids and so forth. We store oil and now we store uncooked -- used cooking oil." And the United States is now importing UCO, used cooking oil, from China in order to make biofuels and sustainable aviation fuel. So -- but you're going to need a lot of used cooking oil to keep the fleets of 40,000, or whatever we have, jetliners in flight.

Joseph Cass

Fantastic. Thanks, Dan. So Dan, an interesting one for you now. So from your perspective, what energy theme topic or just view, do you believe to be true that a few other market participants would agree with you on?

Daniel Yergin

Well, I think I sometimes say I'm off consensus on energy transition because I think it is more complicated and that if you're trying to make this kind of vast change in supply chains more difficult, I think that what I worry about is the clash between energy transition goals and this rising tension between -- particularly the U.S. and China, call it.

In The New Map, looking back, I mean, I was thinking about it today. John Maynard Keynes, the famous economist, had a description of what globalization was like before the first World War. And I was just thinking about it and how it ended. And I was thinking about it today as we see how much more challenging -- the challenges to globalization, the sort of rise of trading barriers and so forth.

And that's part of this new -- so we've gone from what I call the WTO consensus in the new map to great power competition. And it's the kind of the collision between the energy transition goals and a great power competition given that China has a very predominant position in minerals and minerals processing. So I think that's something that is not fully recognized.

And I think maybe not fully recognized just is the extent of how much the energy transition depends upon minerals that it's -- the wind and the sun may be free, you're going to need a lot of minerals for offshore wind turbines and so forth. In other words, a lot of manufacturing as well. So I think those are some of the things that are on my mind. And I find this issue around critical minerals has really gotten interesting and it ties into this whole backing away from global supply chains, trying to regionalize supply chains.

One book I did, Joe, was called -- and that was a BBC PBS television series, was called the Commanding Heights about the globalization. And looking back on it, you realize that the global playbook was efficiency, supply chains. And now you see this backing away from it and regionalization, national security, trade barriers, whatever you want to call them. And you realize that's going to drive up costs, and that's going to be a longer-term stimulus to inflation that people are thinking about now.

Joseph Cass

So Dan, I mentioned in my introduction that you are a very successful entrepreneur. So I wondered if you could give us a story of how you managed to build one of the world's best-known energy consulting firms, the Cambridge Energy Research Associates, starting, I've heard, with a $2 Salvation Army filing cabinet.

Daniel Yergin

Right. Well, yes. So I've been part of this energy research project at the Harvard Business School, and that was a book that came out at the right time. It was on the front page of the New York Times. It was a best seller. And I found just this -- I love doing this research and understanding it because the great thing about energy, it just involves everything from geopolitics to technology. So it's a wonderful window on the world.

And I was -- and then I moved over to the Kennedy School at Harvard, but I certainly had an entrepreneurial bug that I just liked entrepreneurship. And so somebody who came to work with me, Jamey Rosenfield, who was -- as my research assistant, we then decided, well, let's launch a business. And if it work, fine. If it doesn't work, we'll find something else to do.

And so it was really just 2 of us with a filing cabinet, but we had the momentum that had come from doing this very influential study. And it kind of acted as a magnet because it just drew talent. People just showed up at the office and wanted to work. And I remember somebody -- I remember once somebody was at another table overhearing the conversation and hired the woman.

It was just -- when you start a business, and it's just a couple, you can kind of do whatever you want, even if you have no resources. There's a question of how to capitalize the business. And the way we capitalized it is I had an advance through the book called The Prize, which became a Pulitzer Prize winner. And I just used that advance to do it and take a risk and started doing research.

And then it just gravitated people and clients started coming to us, too, and we realized we didn't know what business we were in until we read a perspective for a company called Gartner and realized we were in the syndicated research business. And so we were a couple of hundred people, and we had offices. We'd meet somebody, would you like to -- you could be our Mexico City office, and you could be our Rio de Janeiro office. And so it was very networky.

And then we became part of IHS, which had a big upstream oil research business and then started to become part of larger companies. And then you have HR officers and you start to have procedures and things like that. But we had started this conference called CERAWeek. And the first time we did it in Houston, we thought, this is amazing. We have 180 people. Oh my God, how did we do that? And then this past year, we had 8,600 people.

So there's been -- with ups and downs, a pretty straight line and now part of S&P Global, which has incredible -- if you like, research, S&P Global is a fantastic place to be because it has so much knowledge that's embedded across the companies. And like this copper study, we couldn't have done it without the kind of resources from the different parts of the company and bringing people together.

But I still think that I have the strong entrepreneurial drive and I really think about like doing this big copper study, it was really creating something out of an idea. And I think -- I've never thought about it this way, whether it's creating a book out of an idea or a question on one's mind, which I look at a lot of my books, that's where they emerged from, or from a business point of view, having an idea and then being able to follow through and it's actually something I find exciting. And what I love is I always love -- I learn new things all the time. And it's fun to be part of teams.

Joseph Cass

Fantastic. So Dan, you mentioned it there, I wanted to talk a bit more about CERAWeek. So it's been going now for nearly 40 years, and it's one of the biggest, if not the biggest global energy geopolitical kind of events in the world. So what prompted you to start the event originally? And what aspects do you currently love the most?

Daniel Yergin

Well, what got us -- it just seemed that part of being in any, I think, business is a community of that business. And we saw this as a community to bring people together, the clash of ideas and kind of that constant process of learning. So I think that's what started us doing it. And just -- I remember one person said early on, I said, well, I don't know if we should do something. They said, well, it's your business. You can do what you want. So why don't we have a conference?

And I think people gravitated to it and have gravitated to it because it's very content rich. I mean I spent a month doing almost nothing except preparing for the dialogues I'm going to do on stage, whether it's with CEOs, whether it's with energy ministers, whether it's with U.S. senators, cabinet secretaries, and we take the content preparation really seriously. We don't -- it's not outsourced. And it's our own people who moderate the sessions. So a lot of work goes into that.

And at the same time, of course, it's great for relationships. And I know the oil minister of one very prominent country said, well, there's CERAWeek and then there's everything else. And so -- and it does certainly encompass technology. And one of the big changes is how much more on technology, we created the section called the Agora, which is a technology platform. And we had 225 start-ups there. So it's a very broad range thing.

I was talking to the CEO of an electric utility company. said, "Oh, I used to think it was an oil and gas conference. I now realize it covers the whole spectrum, including electric power, renewables, technology." And I think people found it essential that it's a way to have a sense of where the world is going and what's going to happen next year or the next 5 years.

And of course, it's a great place where -- I mean, there were a lot of Europeans at CERAWeek this year who were doing deals for U.S. LNG. That was very evident that, that was going on as well. So a lot of those connections. But for me, the best part for me is the content and it's the learning and the perspectives that come out of it. And you realize how much could change in just a year.

Joseph Cass

Excellent. So Dan, you advised several U.S. administrations and presidents in the past, including Clinton administration, Obama, Trump administration. So what has your experience been in these kind of advisory roles? Is it difficult sometimes to speak truth to power? And did you have any standout relationships with any particular president or administrations over the years?

Daniel Yergin

Well, I think one thing is -- I mean, I am expert role rather than the proponent of specific policies. So I'm the only person who served on the Secretary of Energy Advisory Board under 2 Democratic and 2 Republican administrations. And because I don't have any specific agenda that I'm pushing. I found -- I think each administration has had to deal with what are the energy issues and the energy crisis that they're facing at that time.

And very vivid in 2020 when it looked like the world was shutting down or it did shut down and that the global energy industry on which the world depends was going to be wiped out because prices went negative and to see the degree of cooperation that kind of put a floor under things and really help put a floor into the global economy. That was very interesting.

But of course, that could not happen now because of what's happened with the war in Ukraine. And we had a global oil market up until February 23, 2022, when the invasion occurred. But now we don't have a global oil market anymore. It's divided and it's a partition world oil market and it reflects the way the world is changing.

Joseph Cass

Thanks, Dan. So Dan, one last question for you now. So thinking about everyone you've met, everyone you've worked with, anyone you've interviewed, who do you think would be an interesting potential next guest I should ask to join a future episode of this show?

Daniel Yergin

Well, I think I could probably give you a list of 20 or 30 people that you should do. And I will take that as an assignment and come back to it because I think it's -- this is a great platform for discussing issues and particularly these issues that are going to get more complicated of this post-WTO consensus, this post-globalization world and how you navigate through it. And it's going to take a lot of judgment and a lot of care.

I should say -- if I could say one thing that struck me. I mean, it's so striking for me why this book I wrote some time ago, The Prize, continues to be read and reread. I meet people who've just read it and will say it's one of the best books they've ever read. And I realize it goes back to something you asked me earlier, Joe, and that was -- that I started a business at the same time I started writing the book, in saying my advice to anybody, don't start a business and start writing a book the same year because you don't get any sleep.

But because I was doing that, I realized a lot of people write books, but they don't realize that when you're in business, you don't have all the information, you don't have all the time and you don't know what's going to happen in the future. And so you're making judgments within that world of uncertainty. And I think I captured -- because I was an entrepreneur at the same time without thinking about it, I think I captured that spirit.

And I think all of that uncertainty is actually going to be greater for businesses going forward than it has been before, not only because of technological revolution like AI, but because of political tensions in the world and kind of a rewriting of the rules and processes of global commerce. So I think with that said, I will think about people who are right in the middle of that culture and trying to figure it out so that you can have them back on future episodes of the show. So in the meantime, thank you for the opportunity to get together for this discussion. I looked forward to it, and we've covered a lot.

Joseph Cass

Thanks very much. Thanks so much, Dan, for your time today. It's been really insightful, very, very interesting. So for everyone watching, everyone listening, thanks for tuning in and see you next time on Fixed Income in 15.