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How shifts in energy sources will reshape global politics

Daniel Yergin, IHS Markit Vice Chairman and author of The New Map: Energy, Climate and the Clash of Nations joins the On the Move panel to discuss his new book.

Video Transcript

JULIE HYMAN: Let's now shift to the energy picture, or perhaps more appropriately, the energy global map. And with us is Daniel Yergin. He is IHS Markit Vice Chairman. He's author of the new book which is called "The New Map-- Energy, Climate, and the Clash of Nations." He is also author of the Pulitzer Prize-winning "The Prize," also about the global energy picture. He's joining us from Washington.

Daniel, it's good to see you. I want to begin with something on the map perhaps. That's California, which says now it's going to ban sales of new combustion engine vehicles starting in 2035. We've seen other countries also take similar moves. When you look at the narrative of the next decade or the next 25 years when it comes to the energy markets, is this sort of electrification going to be one of those big-changing themes of the energy picture?

DANIEL YERGIN: Certainly, electrification and EVs have come from nowhere. The last time we had EVs was Thomas Edison. And now, of course, Tesla really got it started again. And also in China, which is very committed to it.

And I think it's gathering momentum. You see the commitments of automakers like General Motors. The European automakers are under a lot of pressure from governments to move towards EVs. And I think this announcement in California is quite noteworthy, particularly coming right after, you know, the impact of the forest fires.

ADAM SHAPIRO: Daniel, useless trivia, but those original Edison electrics were badged as Studebakers. So you can use that in your next game of "Trivial Pursuit." Let's talk about oil, because there was--

DANIEL YERGIN: Let me just say-- if I could just say one thing. I have this great photograph of Thomas Edison in his car and Elon Musk with his car. And it looks like Elon Musk is a reincarnation of Thomas Edison.

ADAM SHAPIRO: I'm not sure where to go with that, but-- [LAUGHTER]

DANIEL YERGIN: Back to oil. Back to oil.

ADAM SHAPIRO: Let's go back to oil. There was a belief at one point we'd see a recovery in oil. But that now seems to be out. So what happens with the oil companies? They're making pledges of being carbon-neutral by 2050. And oil companies saying that-- what is their future?

DANIEL YERGIN: Well, I think it varies among the companies. I think the European companies have all said, we're going to be energy companies. And they're under a lot of regulatory pressure, and they're looking at how society has changed.

I did a dialogue the other week with the CEO of Royal Dutch Shell, Ben van Beurden. And he talks about being in step with society. That's European society. I think the American companies are still focused on being efficient oil and gas companies and leaving wind and solar to other people. So you have a bigger spread among the strategies of the oil majors than I think we've ever seen before.

DAN HOWLEY: Daniel, I want to ask, you know, in your book you kind of talk about the geopolitical implications. So if we don't see oil kind of recover and we continue to see advancements in electrification, what does that do to the countries that rely on oil infrastructure and the sale of oil to keep their economies afloat?

DANIEL YERGIN: Well, Daniel, I mean, that's a very important question, of course. I think-- we just talked about economics. I think we have to be a little cautious about generalizing about the post-COVID era, because we don't know what kind of growth we'll see. We think US will grow about 3.5% next year. And GDP will have a big impact on demand.

What we also see is the investment has been cut so dramatically in oil and gas development. That raises some questions about supply two or three years from now. If there's a difference between Saudi Arabia and Russia, I think Saudi Arabia has a diversification strategy. I don't think Russia does yet.

MELODY HAHM: I want to pick up on the point that Adam didn't know how to handle when it comes to Elon Musk. It's getting harder and harder to be bearish on him, right? Especially when you see what's happening with Nikola and the other competitors potentially, the chasm growing wider and wider perhaps.

What do you make of these potential collaborations? You mentioned GM was getting very aggressive into this space. But if they're relying on a company like Nikola, do you think it's destined to succeed? Or are going to be continued problems and roadblocks along the way?

DANIEL YERGIN: Well, obviously Nikola has a particular problem. In "The New Map," I mapped out all these changing partnerships and relationships among big automobile companies, tech companies, startups. Everybody seems to be trying to figure out, how do you play in this new world of EVs, of ride-hailing, and of self-driving cars?

And kind of the vision that I have in the book is something that we might call auto tech, when the large tech companies play a very important role in transportation.

ADAM SHAPIRO: Daniel, I'm curious, years ago there was the book "Flat, Hot, and Crowded." and it talked about climate change and the political implications of all of this. When you look at the things that are driving change-- not only in the auto industry, but in the energy industry-- do you see conflicts erupting, or because we're going to be less dependent perhaps on oil, that that might let some steam off?

DANIEL YERGIN: Well, there are two parts to that. One is I think we have moved from a pre-Paris world to the post-Paris world after the climate agreement, where people are all kind of congregating around these goals. I think what people are underestimating is the impact of the supply chains to get to a low-carbon or net-zero carbon future.

And in fact, the other part of my book is about the rising geopolitical tensions between the US and China, and who has a key position in the new energies. It's China. 70% of solar panels. Lithium battery supply chain. So I think over here is geopolitics. Over here is moving to clean energy and low carbon. And I think there could well be a collision between those two forces.

JULIE HYMAN: And I'm also curious, Daniel, where this leaves not just the traditional geopolitical powers, but also the traditional corporate powers. And I'm speaking of the likes of an Exxon-Mobil or a Chevron. There's now speculation that Exxon-Mobil's sort of fortress dividend might be under threat, because the company's shares have been falling. What does that do to the sort of world oil order? Or is it just a reflection of their irrelevance rather than, we'll force them to change.

DANIEL YERGIN: I think it's a reflection of what's happened this last year, what I call in "The New Map" an economic dark age. Maybe now it's an economic twilight that is still, you know-- we still haven't recovered. And that's reflected in oil prices, which have been an economic symptom really of the virus.

Dividends have been very important, obviously, for the companies. And they're following investors. And you've seen some cuts by some of the majors. I don't know what the US majors will do. They see it as very important.

I think in general, the oil industry and the shale industry needs to have a new social contract with investors-- and that's even more acute for the shale companies-- to assure that investors actually get money back. It's not growth at any cost. It's growth at what cost.

JULIE HYMAN: We will see if that materializes. Daniel Yergin, thank you so much. Appreciate it. The new book is "The New Map-- Energy, Climate, and the Clash of Nations." Daniel is also the IHS Markit Vice Chairman. Thank you so much.