Daniel Yergin — Oil destroyed Hitler, fracking destroyed Putin

27:38But if you look back on it, I think you just say there was an inevitability to it, which also had to do with the consolidation of nation states. Why didn't the U .S. government or the UK government or so on? Why didn't they do more? To be like, okay, you guys are companies, you guys can't negotiate that hard, but we really care about making sure America has a lot of oil. You know, I think the governments did back up, and I think the British, remember the The British owned a big share of British petroleum now BP until the late 1980s. So the British government was in there, but then you had the nationalization of what was then called a Persian, an Anglo -Arainian oil, which became BP.

28:28So I think it was inevitable, but I think the governments did try and support, but But there were limits that they could do. But the question of access of maintaining the supplies then and now remains that question of access remains crucial today. You have the U .S. Navy today trying to push back on the houthies in Yemen who are attacking oil tankers. Thinking purely from the perspective of the companies. If you were in charge of one of the majors, would you have refused to train domestic workers in the exporting companies? No, I think that was part of your way of trying to embed yourself there to bring them in so that you were not this isolated island.

29:27And if you do look at Venezuela and nationalized, It's the oil operations, but by that point, they had people who were very well trained at running refineries, at drilling, at finding oil. They still carried some of, for quite a number of years, carried some of that DNA with them in their operations until the complete nationalization and chauvus came to power. Was the continuation of anti -trust and oil after World War II? Was that a mistake? Because what happens often on a reading your book is like the oil producing country is can negotiate together. Obviously after OPEC, they're literally a cartel.

30:08But then these different western companies they can. In 1973, finally, the US government did give an anti -trust waiver to the companies to try and have a united front in the negotiations. But remember, it got all tied up with geopolitics. It got tied up with Arab -Israeli wars and so forth. So it wasn't just about oil. There were other things going on and the use of what was called the oil weapon. Yeah, okay, so let's talk about the oil crisis in 1973. One thing I was surprised to learn is that the supply of oil didn't actually go down that much like global supply of 15 % or something declined.

30:44Why didn't have such a huge effect? This was completely unprecedented, unexpected, so it created a panic and it was also right towards, you know, as the the final months were coming of the Nixon administration. So it got all tangled up. And then we had the system of price controls and allocation controls, which made it much harder for the market to adapt. I mean, one of the lessons to me from the prize is actually enabling markets to adjust because when governments try and control them and make decisions and allocate and governments, even in the United States and some states, want to do that today.

31:28It accentuates shortages and disruptions and price spikes. But the tendency is to want to control them. But I think there was just a, you know, there was far less knowledge about the market where supplies were. There was no sort of coordination. Now there's much greater knowledge and transparency. I mean, it was just, and you had what we're called integrated companies, the same company that produced the oil in the Middle East, put it on their tankers and sent it to their refineries in the United States or Europe, to their gas stations. And that system is gone. When you see the names of the big oil companies on a gas station, if you're not driving an electric car and you pull in, odds are that it's not owned by that company.

32:17It's a franchise. I see. Okay, so that's one other thing I was confused about because I wasn't sure how before a spot and future exchanges for oil this is this happens after the oil crisis in the late 70s and 80s. I didn't really understand how oil is getting priced and also how Different countries are able to have such a straw because you know, traditionally it's the prices said by supply and demand. It's not said by So, OPEC was setting prices, but then the market responds, demand goes down. And in fact, that's exactly what OPEC did with its prices. It created an incredible incentive to bring on new supplies and to be more efficient.

32:58And that's it ended up undercutting its own price. I mean, one of the things I really carried away from the prize is, as you know, there are hundreds of really interesting characters in the book. but the two most important characters, one is name supply and one is name demand. And that's something that I, you know, you've got to keep in mind with all the other drama that goes on. But, but see, I mean, the interesting thing for me in the book is that oil did seem to be, at least until very recently, pretty different in that with other sorts of commodities, you have strong elasticity as a supply where if I don't know, lithium gets more expensive, you'll figure out, that's two -thirds of it is lithium and it's not that big a deal.

33:41Or find more lithium. Yeah, whereas at least during the oil crises, it really felt like the entire world economy is just on the wall. Well, I think that goes back to the centrality of oil as a strategic commodity. Japan had basically just switched its economy from coal to oil. Europe was switching from coal to oil and it was just such a high dependence. I mean, markets did eventually respond. I mean, you had a price collapse in 1986, which was the result of that. I mean, in early 1980s, people were saying, oh, the price of oil is going to go to what in today's dollars would be two or three hundred dollars a barrel.

34:21It collapsed. And so markets do respond. It just took longer for that to happen. Daniel Jürgen tells the story of oil and power. But how did electricity go from this novelty to something that's powering businesses and households worldwide? It was standardization and infrastructure. Edison and Westinghouse created systems that could reliably deliver electricity to millions. Stripe is doing for payments with the early electricity pioneers did for power. They're creating a standardized, reliable infrastructure that's powering the global digital economy. Today, 1 % of the entire world's GDP passes through strife.

35:02That includes my business, which I set up using Stripe Atlas, and which I run using Stripe Billing. But it also includes the world's biggest and fastest growing companies. Open AI, Hertz, and Thropic, they all run on Stripe. Learn more at Stripe .com and now back to Daniel Yergen. If you were in charge of one of these OPEC countries in 1973 and you realize that you have a tremendous amount of leverage in the short term on the world economy because everything's a stance over the long run substitutes will be developed or more oil will come online and so forth. But you have this unique moment of leverage where you know people really need your oil.

35:43What would you have done? Would you have like give me a seat on the UN Security Council and I'll open up the gushers or in the long run. Well, I think these countries did assert their political power. Certainly, again, it was very different to Iran, but the Shah of Iran, you know, until he fell, he got sick and then he fell, asserting, you know, we're players on the world economy. Suddenly people, you know, Saudi Arabia had been a country that people didn't think about much about in the United States. Suddenly, Saudi Arabia became really important. And you had this huge flow of money that went into these economies, you know, what were called petro dollars.

36:21And that made them, you know, was a whole other source of influence. You know, in the book I talk about Richard Nixon's vice president, Spiro Agno, who, you know, had a quit. You know, he actually resigned because he was corrupt and even had people paying for his groceries. And a couple of years later, he shows up in Saudi Arabia as a, trying to do businesses as a consultant. I mean, people went there, that's where the money is. If you go today, if you're, you know, a private equity fund, many of them, you know, they're a number one place to go to raise money today, is not necessarily the pension funds of, you know, various states in the United States.

37:05These private equity funds or venture capital funds are going to the Gulf countries again because that's where the money is. What does this happen with you? Where you're the world's expert on energy. I'm sure it's like your expertise is worth a lot to them. Well, I mean, yeah, so I mean, I certainly speak in that part of the world. I mean, it's pretty much, sometimes I joke the best thing about energy business if you're a curious person, it's global. In some ways, it's a worse thing because it involves so much travel and so much jet lag. But I certainly will spend time there. And of course, for me, it's a constant process of learning.

37:45Because you have to show up to get the perspectives and understand what's in people's minds. Which of the oil producing countries, they got tremendous rush revenues in the 70s because the price of oil jumped up so high, which of them used to best? Because if you look at a bunch of them, obviously like Soviet Union didn't do enough to make sure it didn't fall when oil prices collapsed. Iran, Iraq, use the money to go to war. Saudi Arabia uses it on welfare. Well, I think the country that has done the best, it was not a big player then, is United Arab Emirates, Abu Dhabi. They built a, you know, probably sovereign wealth for a fund that's worth a trillion dollars to diversify their economy.

38:29A couple of years I looked at it, more than half their GDP was no longer oil. So, and that's what Saudi Arabia is trying to do today to diversify their economies and make them not just dependent upon the price of oil because you don't know where technology is where the markets are going to be. So, you know, the Shah of Iran used to say who fell from power in 1979, he used to say that, you know, he wanted to save the oil for his grandchildren. Now, grandchildren are in charge in many of those countries. Not necessarily grandchildren. His grandchildren are somewhere else, that's right. But on the Arab side of the Gulf, and they're focused both on continuing that revenue stream, but needing oil in order to diversify their economies away from oil.

39:21I mean, that's interesting. Like Russia is still, at the end of the day, heavily dependent upon oil and gas. and that's a distorts their economy. A Middle East obviously today has a lot of crazy ideas, a lot of the worst sort of pathologies, political and sort of religious pathologies in the world exists there. Is it just a coincidence that this is where the oil happened to be or did the oil in way enable or exasperate this radical tendency. That's a very good question and how people looked at oil and dependence. I don't have a good answer to that because it also, I mean, there's oil, but there's also religion, there's also the Arab -Israeli conflict.

40:18There's Iran, which is really, it's a neo -colonial power in the Middle East. It has probably, if you look at its proxies, 250 ,000 troops and other countries who belong to various militias and so forth, and Iran that, it's interesting when sometimes when I mean, the Arab Gulf countries, they don't refer to Iran. They refer to the Persians in the sense that Persia wants to dominate the Middle East as it did in centuries past. Right. They're imagining Zerxes, armies, just. So we're talking about sovereign wealth funds. And I think this is up. Yeah, this is a very interesting aspect of the modern world where some of the sort of biggest investment vehicles in the world are the offshoots of oil proceeds over the last decades of.

41:13Yeah, I think, I mean, most, you know, if you look at Norway or if you look at the Middle East, there are offshoots of oil. Singapore is, of course, is the offshoot of hard work. Right. If you are in charge of an oil producing country, sovereign wealth fund, and it's, I don't know, trillion dollars or something, which it per capita is actually not that much, right? If you're like Saudi Arabia, you got a trillion dollar, sovereign wealth fund, it's like, the population is like 30, 40 million people. So it's per capita, it's like 20, 30 ,000. And so it's not that much for capital, but also you know that majority of your GDP is not gonna be sustainable over the long run.

41:50And you're in charge of it. What do you do tomorrow? Is it important that you're like use that money domestically? Or would you just like globally just put it in? Well, it's very interesting in Saudi Arabia. It's a question whether you use that money as a national development bank, which is one thing, which is quite another thing to use it as a, basically as a global diversification investment vehicle. And I think in Saudi Arabia, what's called the PIF, the public investment fund is doing both. I think in Abu Dhabi, they've differentiated the roles of these different funds as to what is a global fund.

42:31But I think, you know, the argument is the same argument that you would get from a financial advisor in the United States, which is diversify. Right. But if you're just purely like thinking you had as investment vehicle, then maybe the rates of return aren't that high domestically and then so. Well, yeah, but you do want to diversify your economy. You want to bring in investment and there's also another critical need. You need to create jobs and And the oil industry is a capital intensive business. It's not a labor intensive business. So you need to bring in other kinds of industries as well. Because if you look at your population, maybe 60 % of your population just roughly is under the age of 30, something like that.

43:18So you have a real need, a real job creation need. Oil famously makes rich countries richer and poorer countries poorer when they discover it. And if you're, let's say you're a country that just discovered oil today, but it's got a really low GDP per capita. Maybe you're already advising such countries, but if you were advising them, what is it that you tell them to do to avoid getting Dutch disease themselves? Yeah, so we need to explain the Dutch disease, which means that you create an inflationary economy and make yourself uncompetitive, you know, the heart of the Dutch disease. And of course, that concept was invented for the Dutch because that happened when the Netherlands became a big producer of natural gas.

44:03So I think it is a cautionary tale. You want to, as I say, sterilize some of the money that comes in, put it into a sovereign wealth fund, invest it overseas. And then you want to put money into education and health and those basic human needs create. I mean, you want to turn, I guess, financial capital into human capital. Why is it so hard to set up a stable, oil -arrantier state? Because you have, theoretically, it seems like, I don't know, you've got trillions of dollars a while right under your feet. Well, I think there's no single, some have, some have not. But I was just about to say, if you look at the examples, it's like, so many just go off -kilter, right?

44:46Like Iran, Venezuela, Libya, so forth. And very few of them are like just stable, you know, we made a ton of money, Saudi Arabia type states. Well, I think it is. If you have that huge inflow of money, it really can create a lot of distortions. And, you know, I think if you look back at the events that led to the overthrow of the Shah of Iran, I mean, things don't happen for one reason or another. He probably had cancer for two years and was losing it. And he also had been so arrogant that he kind of alienated people and he had his secret police and so forth. And then in this pale male rush of overspending created inflation, dislocated the economy.

45:26So, I mean, it's a good question for study, as to look at it on a comparative basis, what worked and didn't work. And it isn't just oil and it isn't just money. There are other things that are involved as well. I mean, clearly, there was a huge religious, well, a religious reaction led by the Alitaya Khomeini against modernization, against the role of women. I mean, the Shah was, you know, saying women should, you know, can get educated, play major roles in their economy. And that was not something that the very conservative clerics could stand. And so it isn't just about oil and just about money, but it's part of a larger mix.

46:14Why is a Ramco so much better run than other companies tied to other basically sort of nationalized oil companies? I mean, there are others that are well run, but Ramco is a very well run company because I think they did, you know, you described it before, they rather smoothly did their transition and retained and their people are highly trained. I mean, you know, if you go to a Ramco, you meet people at PhDs from MIT or Stanford or, you know, University of Texas. They have a very well -trained global workforce and a very high standard. But I think they drew upon initially the cultures of the companies that had were eventually nationalized out of the business, but the people were trained.

47:04I'm curious if there's any sort of stories you can, I don't know, I imagine since you wrote the prize, you're like, well, the world leaders are inviting you to come meet them and give advice and so forth. I don't know how many stories you can tell from these sorts of conversations, but is there some person who's like really struck you as they've got their head on straight on these kinds of issues or, I don't know, just like, you've been around the world. I'm just curious, you have some sort of crazy stories about that. Yeah, well, I think one that is in the new map and that you and I have talked about is the meeting with Prime Minister Modi in India, where India was really at a crucial point, whether to get out of in a book you probably don't know that I did call the Commanding Heights in the permit Raj, where a government really tightly controlled the economy.

47:50And, you know, I describe a scene in the book where he brought his senior advisors together to argue about whether you allow market forces to work or not. And it was a very heated discussion. And then I just remember his remarks is we need new thinking. And that, you know, just those simple words, I think, have pointed to how India has become so much of a bigger force in the world economy today, as opposed to being a sort of enclosed, uh, uh, uh, closed economy. So in 1973, uh, well crisis, before that, if you look at the sort of act in 1973, I thought we were already in 2024. Okay. We're moving around.

48:36Yeah. Um, the, uh, the, if you look at the sort of rates of economic growth or rates of, uh, total factor productivity growth before that date, it's like, uh, pretty high for a long time. You know, it's like 2 % total factor productivity growth before 1970s. And then afterwards, it's like less than 1 % in the United States. How much of that is tied to the energy crisis or was that just a coincidence? Well, I don't have expertise on that, but I know people like Ben Bernanke, the former head of the Fed, have actually studied that crisis and why you had that slowdown that occurred. but it was a, you know, the US went from a, you know, being on a very strong growth trajectory, went into, you know, well, at that time was the deepest recession, since the Great Depression.

49:28Of course, we've had deeper recessions since then. And, you know, it took, you know, it took a decade to get out, it took a decade to dig out of that hole. But then, I mean, the rates of economic growth didn't go back to, well, also the US, the US was a, you know, as your economy becomes bigger, you don't grow at the same rate, but you're growing off a much larger base. One of the things in Silicon Valley that these technopharmistic people really talk about is, what if you had just ridiculously cheap energy because of solar, because of other things? And the question is, would you just have, would the economy just explode because the economy's bottleneck by the price of energy, or would it just, would it not be a big deal?

50:11Because there's other bottlenecks. Well, I don't think it seems to me today, I mean, we'll come to it in terms of AI and electricity, but I mean, I need to reflect on that, but it doesn't seem to me that the cost of energy is a general constraint on the economy. It is probably somewhat of a constraint in California because it has the most expensive energy in the country, but that's because of state regulation.

50:41But all of the big tech, you know, big tech wasn't born in 1973, it's much more recently that it's happened. I mean, it is, you know, like the oil industry has happened pretty quickly actually in this space of time. And so I don't think, I mean, I think when you have price spikes, when you have disruptions, then that's when you see the cost, and those risks are there. But in general, although when you get into a presidential election, the incumbents always worry about the price of gasoline because it's so sensitive, because people pay it. It's the one price you pay all the time, and you see it.

51:21I need to think about it more, but I don't think it's a huge constraint. Now, maybe nuclear energy way back in the 1950s was supposed to be so cheap that you wouldn't meter it, too cheap to meter was the phrase. And now there's the fusion which seemed to be 50 years away is now maybe 10 years away. And I think technology will change things. But I don't think electricity may be a constraint on the growth of AI in the near and the medium term, but that's a very specific problem. There's been different projections made about how much energy will be required for AI, but the big thing is they need these big training runs and they keep getting bigger and bigger over time.

52:12I mean, there's one projection is that 10 % of US electricity by 2030, which is half a decade away, will be going to data centers. Yeah. And it's about 4 % today. What have changed? It's been in the last year and a half in terms of thinking about data centers, AI and electricity. It wasn't on the agenda a year and a half ago. And I remember I was at a CEO conference with electric power utility CEOs about a year ago and they were talking about grows being surprised by it. Then we have our conference in Houston in March and by then people have woken up to, in fact, you're talking about going from 4 % of U .S.

52:49electricity to 10%. And US electricity hasn't grown very much over the last 10 years. It's grown at 0 .35%. Now you're looking at maybe it's going to grow at 2 % or more. And that adds up very quickly. And I was very struck. I did a discussion with Bill Gates at our CERWEE conference in March. And he said, we used to talk about data centers as 20 ,000 CPUs. He said, now we talk about them as 300 megawatt data centers. And the sense is that you have electric cars and sort of energy transition demand. Then you bring back chip manufacturers and smart manufacturing in the United States, that electricity demand.

53:39Then you have AI and data centers. And suddenly, this industry that had been very flat is now looking at growth and how are you're going to meet the growth is very much on the agenda right now. And you know, data centers are looking where can we position ourselves so that we have access to the electricity that we need reliable 24 hour electricity. So now, you know, there's energy security in terms of oil and gas, but actually it's also energy security in terms of electricity. So there's your potential constraint on economic activity. Now let me say, some will say the answer to that is innovation that chips will become less electricity dependent or data centers will operate differently that the demand will not grow as much.

54:29So there is those who say that will happen, but it hasn't happened yet. And those who are saying, how are we going to, how are we going to meet that demand? And AI is going to demand a lot more electricity than we had thought about a year or a year and a half ago. It's potentially even worse than the 10 % number implies because it's not just widely distributed like households would be. In many cases, they have to be one gigawatt to one specific campus or location. Right. You look at developing data centers, they'll take all of the electricity generated by a nuclear power plant. Well, if they do that, that means you've taken that base load nuclear power off the grid.

55:16So, you know, there's a kind of scramble to understand this. And then there's the issues that we have in our country, which is you can't get things permitted. It takes so long, you have supply chain problems, and you have a workforce that is aged out. You know, it's said that, you know, to be a fully trained lineman, you need seven years. So, you know, you can see that this area of electricity is pardon me for saying it is hot. Yeah. You know, the thing I find wild when I'm reading the prize is just that how much sort of economic development is ultimately contingent on the laws of physics, where suppose that fossilization happened in a different way, and then oiled in form, right?

56:02And so you have to, you, let's say, fall of a cold in form, either. And then it's hard to imagine how society goes from like water wheels to solar powers. Well, that's right. I mean, what you really realize is that hydrocarbons have been the fuel, the engine really of economic development. I mean, you know, people would still be in sailboats. They would still spend six weeks crossing the Atlantic. We were to take weeks to go from one place to another. It's hard to, that's a very interesting question to imagine our world without them. It's also interesting that the tech trees play such that just when you need more runway, you get the next energy transition and then you get a little more runway.

56:46It's weird that maybe we would have gotten in any way. You were going to run out of whales, basically. And I love that these kind of consultants, this professor Yale did this experiment. He needed some extra money and he did some studies that showed, well, actually this stuff called rock oil, you could turn it into a lighting shoe, a fluid. And the risk -taking of it, but yeah, it's hard to, you know, we wouldn't be where we are. We wouldn't have the world today. We wouldn't be a world of 8 billion people were not for it. Obviously, there's going to be change. And I'd say right now, the incentives for innovation are there.

57:28That's why we may see a runway of what's going to come, but it may really come from the side. Yeah. And something else that the carousine, and the fact that oil for the first 50 years is used for only lighting. Another thing that's interesting about that is people are asking now about these AI models, where you can literally get a million tokens, like many books length of content out of these models for 15 cents. And so one question people are asking is, you know, if you're using, let's say if you did $100 billion worth of tokens, what does that look like? What does an industrial scale use of intelligence look like?

58:07And the fact that with crude oil, in the beginning, you're like, you're producing sort of a lot of blood because you're only using it for lighting. And then you discover they sort of industrial scale use so this technology, which is obviously motorized transportation. And one question you can have for AI is like, if currently what we're using these models is for research and chat and whatever is like the kerosene, what would the billions of vehicles equivalent to the AI look like? Well, I think that's a question that I'd like to ask you. But it is a sense that we are at the beginning of something new.

58:43And I remember when actually it was interesting, political leader in Central Asia saying, AI is gonna be the true source of power in the future. Look, right now, all the top 10 most popular songs have the same structure, the same chords, they're the same three minutes of mass market appeal. The last 20 years, music has just become progressively more uniform. Soono is building the world's best eI -generated music and they need the help of some amazing researchers. People haven't played with melodic form and structure in decades. With Soono, people can finally experiment with how beautiful music can be.

59:26Like the music you're listening to right now, which was generated by Soono. So if you're an M .O. researcher and you want to work on a killer team with lots of GPUs and leverage a ton of interesting data. And you want to study the ultimate frontier of beauty and creativity and humanity's oldest art form. Email your resume to dwarkeshatzuno .com. All right, back to Yergan. How mad are the frackers that they basically sold America's main geopolitical problem? But they were so successful that they're, they're not even making, they've competed away their profits. Well, no, I think that that was a period.

1:00:05And that was a period up to about 2017 when it was growth for growth sake. And then basically the financial community said, hey, guys, the party's over. I'm not going to reward you for growth. I'm going to reward you for sending money back on my investment. And so I think, you know, in a sense, Shale is almost a mature industry. And I think people don't understand how transformative it's been. I mean, the United States was the world's largest importer of oil. We were only producing 5 million barrels a day of oil in 2008. Now we're 13 .2 million barrels a day. The U .S. is energy independent. People thought it was a big joke.

1:00:48It could never be energy independent. It was every presence that we want energy independence. And it was like, you know, the late -night comedians can make fun of it. Actually, it's happened. And it's had huge economic significance. Back in like 2008, the U .S. was spending like $400 billion a year to import oil, basically spend nothing to import oil. And it's been geopolitically very significant. And I think that's been a learning experience for the Biden administration because there It turns out that if it wasn't for shale gas made into what's called LNG, liquefy natural gas, shipped to Europe, Putin could well have shattered the coalition supporting Ukraine when he used the energy at weapon, not oil, but gas.

1:01:37And that, you know, suddenly you had European politicians coming to the United States to of trying to secure supplies of LNG, because so we're worried about it. So it's something that is, you know, it really is a revolution that is playing out today. China imports 75 % of its oil. It wishes it was in our position. Um, we're energy independent, but how far are we from a scenario where our allies, most notably Japan, are also energy independent. Very, very, very far. But including our exports. Well, that's why when the Japanese Prime Minister was here for a state visit a few months ago, they were expressing great alarm about future LNG exports because they, for them, being able to import energy from the United States is very critical to their energy security.

1:02:35Otherwise, they're pushed back where they're going to get their LNG. They'll get some in from the Middle East, some from Australia. but they'll be pushed back to getting it from Vladimir Putin. So for them, their energy security, this has become US energy exports, US shale, has become part of their energy security. I never thought of it quite that way, but I think, you know, if you think about what the Japanese are saying, that's really what their message is. You know, I did an event with the Japanese Prime Minister, and, you know, now I think about it in the spring time, That was very much, that came through very clearly that for them, US exports to them are part of the security relationship.

1:03:18US LNG is now part of the arsenal of NATO. You know, we're talking about the geopolitical significance of US shale. No one would be happier to see a ban on US shale production than Vladimir Putin. And, you know, I have firsthand sense of that because in 2013, before he annexed Crimea, I was at this conference, which is his version of a global economic conference. And they said, you could ask the first question. And so I said, you know, when it was going to be about something we were talking about before there, over dependence on oil and gas revenues, I mentioned the word shale and and he erupted and kind of said it's barbaric, it's terrible, and he got really angry.

1:04:01And this is in front of 3 ,000 people, so it's rather uncomfortable in that position. But I realized there were two reasons. One, he was worried about shell gas competing with Russian gas. And two, he saw that shell revolution would augment the position and influence of the United States because the US would no longer be energy to independent. And he was very precinct, he was right about both of them. I think when he invaded Crimea, I don't think he ever imagined that if he cut off the gas to Europe that Europe could survive. Europe survived. Yeah. What I think I'm actually very curious about is the prize, especially what all your books have a narrative, you know, narratively driven and you have detailed understanding of like people and people and events and so forth.

1:04:51As compared to somebody who's just like, here's how many barrels are produced in your ex, here's how many barrels are produced in your y. Do you feel like when you're in these conversations or you're like trying to think about the future of energy, like really, you really need to know what, how Drake was thinking about the drill wall and how. Yeah, I mean, I think in one way, I see myself as a storytellers and I like narrative. I think that's the best way to communicate. I like writing about people and not just about abstractions. You know, it's funny when I was like writing the prize or writing these books, I almost, it's strange to say, I almost see it like a movie when I'm writing.

1:05:33You know, I see what's happening and that makes it more vivid for me. And I also think that, you know, there are more and more things you're competing with if you're a writer, you're competing with TikTok, you're competing with YouTube and everything. Podcasts. Podcasts. So you've got to draw people in and people love stories. I mean, I mean, I've been, this is, I started writing when I was like a child. You know, my father had an old typewriter. He'd been a newspaper reporter and I would hunt and pack and just, you know, write stories. You know, sort of high school. I was a student body president, but I was also at the literary magazine.

1:06:21And when I was an undergraduate at Yale, I started a magazine called The New Journal, which was narrative journalism. And so I learned a lot of my writing. Doing that, I learned a lot of my writing, writing magazine articles, how to tell a story. And so I really, I love shaping a story. I love finding a character. I love finding the great quote that just kind of illuminates everything you're trying to do. And I love not boring people. When you're writing the prize, it's a seven -year process where there's the endurance, but there's also the sense of, you got to have faith that at the end of this.

1:07:03You're making a deal with yourself. You're making a deal that what you write in year four, you're not going to totally rewrite in year seven. Because otherwise, you'll never get it done. And see, the odd thing, the strange thing is I started a business the same year I started the prize. So I felt that I learned, so I was living entrepreneurship. And I think that sometimes people, when they go back and write history, they know the outcomes. So I think everybody knows what was, you know, they had all the information, they had all the time, and they knew the outcome. Of course, you know, you never have all the information.

1:07:39You certainly don't have all the time, and you surely don't know the outcome. And I think that sense of contingency, which is such a part of human history, I think I feel I tried to capture. I think that is one of the things that made the prize distinctive, that makes the new map, that makes the quest distinctive. I mean, in the quest, the middle book, it was a question, where the hell did the modern solar and wind industry come from anyway? And it's sort of entrepreneurs. And so I, you know, because I have been an entrepreneur, you know, I have a feeling for it. I mean, you're an entrepreneur in terms of what you're doing with podcasts.

1:08:18You sort of invented as you go along. And I tried to capture that at the same time. I love writing narrative. Well, the thing I'm curious about is if unless you meet another analyst who doesn't have a vivid sense of narrative history, but just like knows the facts and figures. Which is that they're missing? What are the, what are the, what kinds of understanding do they often lack when you talk to them and so forth? Well, sometimes, I mean, I will have great respect for them and I have great respect. I mean, I also love, you know, reading the monthly energy review in the Department of Energy, which is only statistics, or the, the, the, the, the, the statistical energy review.

1:09:01So I love it. But I think what you may miss is the contingency, the human agency, you know, the decisions that went unto things, the right decisions that were made, the mistakes, and the things that you missed that you were wrong about or that would have been wrong. So I think so it's you know it's it's it's the texture I mean there is a tendency to think that things are inevitable but you know that the world can change from one day to the next. That's what happened on you know December 7th 1941 September 1 1939 it could happen any day in the Middle East right now that you could go from one to the next and it's a different world.

1:09:53Yeah, and I mean just reading it, you can tell like it's hard to understand many of the things if you don't have an understanding of like Arab nationalism, forced the Saudis to support the embargo and then why did Egypt like launch the tackle because they wanted to cease fire to be in a different place, but they actually wanted to end the world. That's right. Like there's so many different things like that. Yeah, you don't understand the why these things happen and you just look at the numbers you know, but why did it happen? And so, you know, part of it is, you know, through narrative, explaining why it happened.

1:10:25Yeah. Let's talk about solar and renewables. With oil, you have a commodity, which is a flow and you can cut it off and you can turn it back on again. So it gives us the person who's producing it a lot of leverage. Whereas with wind and solar, if you're the people producing it, it just a capital stock, right? So you just, it has, how does that change the geopolitical situation and the kind of leverage that the producer might have. It's a question of scale and how long. I mean, I think what I carried away basic premise of energy security goes back to Churchill. He said, safe to you lie in variety and variety alone, diversification.

1:11:05So wind and solar give you diversification. Electric vehicles diversify your fleet. So I think those are all there. I think, you know, so for China, I think wind and solar, electric cars is very much a strategic issue because they see the vulnerability of importing 75 % of their oil, much of it coming through the South China Sea. They know the story of what happened with World War II with Japan. And so for them, it is, you know, the shift to electric cars is less about air pollution, much more about energy security. And it's also about knowing that they couldn't compete in the global market with gasoline -powered cars, but they can with electric cars.

1:11:59So, those are the strategic things. but wind and solar give you a more diversified system until you have batteries that can really deliver the storage. You have the intermittency problem. So you take California today, people think wind and solar is advanced. It's true, they're 25 % of your electric generation in California, but 43 % of electric generation comes from natural gas. So natural gas and that gets back to the data centers, you're gonna need to bolster your electricity power system. how much can you do with batteries and how much can you do with a new natural gas. So, but, you know, wind and solar are also stories about entrepreneurship.

1:12:43And in the quest, I have, you know, I asked myself, where did the wind and solar industries come from? And the wind and solar industries came from two, the solar industry from two emigres who had left Europe, one of whom had driven his car out of Hungary in the 1956 revolution. 1969, he's a chemist working for the US government. He and he has partnered decide to go in the solar business. And that became the first solar company they started in 1973. And the wind business, I like to say, the modern wind business is the result of the marriage between California tax credits and the sturdy Danish agricultural industry because it was driven by tax credits, but they needed to find wind machines that could stand up in the wind blue in the Hatchapy pass.

1:13:35But it's interesting that it took about 30 years both those industries to become competitive and it only happened around 2010 that they actually became competitive. Now of course, they're very competitive, But then guess what? Now, they're all tied up renewables, they're also now tied up in geopolitics. And you know, and when I call them the new map, the movement to, you know, the great power competition, there's a U .S. just put 100 % tariffs on Chinese electric cars, 25 % tariffs on Chinese storage batteries. So, you know, if you, we just had this build the inflation reduction act, not just it's very recent, huge, you know, of trillion dollars people, the treasury estimates when it's done, but it's about climate and renewables.

1:14:24Oh, but it's also about competing with China. I speak of solar deployment. So solar is on, I think solar deployment is on an annualized $500 billion. That's the yearly amount that we're investing in deploying it. Is there anything when you look through the history of the prize or the history of energy. Is there anything comparable to this scale of deployment, maybe initially electrification, or is this just unprecedented scale? I'd have to think about it. I mean, it's happening fast, but as I say, these guys started the solar business in 1973. It's now taken off. It's also interesting that what really gave the boost to the solar industry is German feed -in tariffs, which provide at the incentive for the Chinese to dominate, to develop them, because they dominate the business.

1:15:26But you know, you know, solar, I mean right now, wind is about 10 percent of U .S. electricity solar is about 3 .5 percent, but solar is going to grow, it certainly will grow very fast. You do see, and I just heard this when I was at this utility commissioners conference, real tension between states and localities where the states want to push it, but localities don't want solar or don't want wind. I think we're not in touch at it and I saw a couple of signs around of, you know, no more wind. Well, they just had a thing where one of the blades off, one of the big wind turbines ended up fell off and washed up on the beach and has now created, you know, it's really huge and consternation and suddenly reopen the discussion.

1:16:09But you need supply chains and wind and solar are different, of course. If you want to start a new offshore wind project in the United States, you can order your cables, but you won't get them until 2029 or 2030 because they're the supply chain issues. Solar is different, but of course, solar is so dominated by China. Yeah. So oil companies are investing a lot in renewables. Is there a bunch of skill transfer here that actually means that these oil companies will actually be really good at deploying solar or something? Or is it very interesting? There's a difference among some companies. Some companies say yes and they look at offshore wind and say, well, we're in the offshore oil business.

1:16:51We can do offshore wind. And you see that in Europe where equinoir, which is an Norwegian company or BP or Shell or total, or you know, big and offshore wind. And they say we have skills in that. Solar is a little different. Exxon is now going into mining lithium, thinking that they can use skills that they use for that. But the US company, your company, say, what we do, basically we do molecules. We don't do electrons. And that's where the difference is, the European company say we can do all of it. But the European, the European state, we can do all of it. The American companies say, well, you know, we have no comparative advantage in electrons.

1:17:37But there's a lot of interest in hydrogen, because that's another molecule. And the degree of hydrogen can substitute for natural gas, for instance. And that's where a lot of investment. But it's very early. And, you know, again, sometimes people forget about the energy business. It's scale. It's so big as what the requirements are. But also it's surprisingly small as the fraction of GDP. Like oil is like two to three percent of GDP. And obviously the entire world depends on it, but we wouldn't see that in the GDP numbers. Yeah, I mean, it used to be a much bigger share of the stock market. You know, Dow Jones, it's also smaller share.

1:18:16That's right. It's still these strategic commodity, but there are a lot of other things that go into it. Now, if you look at the, what are the Department of Commerce uses? There are different categories of jobs. Altogether, they'll say that they're about 12 million people in the United States whose jobs are connected to the oil and gas industry. I'm curious about how you imagine the demand elasticity for oil changing in the future. And so this will be a sort of run on question. But so you can imagine in the past, it's like, you're not going to stop going to work because oil is 10 % more expensive, right?

1:19:00So people with the Arab oil embargo prices went up like 300%, even the supply only went down 13%. But now, if oil goes up in price, you can like zoom, zoom, you can video conference or something. And in fracking also, you can increase supply if you want to. And so yeah, I'm curious how you, because of these new sort of afflexibilities we have, is there going to be a lot more elasticity and demand? And also, actually, maybe the main thing is that with AI and with compute, you have this sort of thing, where you can just dump arbitrary amounts of energy into this and it gets better. And currently, there's nothing where you can keep dumping more energy into it.

1:19:44There's a huge elasticity of demand. Yes, I mean, I think you would know, and you know, the podcast you've done, how AI is really going to change everything, you know, which is kind of the expectation now that it's going to change everything, including energy. And, you know, and then you have $6 billion change. My own view is that the energy transition is not going to happen because of price, it's going to happen because of policy and technology, I think, is what's driving it. I have the view that people have, you know, if I had to kind of simple notions of how the energy transition will work.

1:20:38That's one of the things in the new map. If people read one part of it. It's read the section on energy transition because it tells you what we're talking about today is not anything like any other energy transition. Every other energy transition we've had has been energy addition. Oil discovered 1859 overtakes coal as the world's number one energy source in 1960s. Last year the world used more coal than it's ever used three times as much as the 1960s. Now the And ideas, can you change everything literally in 25 years? And I think some of that thinking was developed during COVID when demand went down and price went down, collapsed.

1:21:19Part of it is, you know, people worry about energy security. I was just reading last week the budget message from the finance minister in India. And she talked about energy security and we have to maintain economic growth. And it's very important to do that and energy security as well as energy transition. So it's a different balance. There's a difference between the North and South. And then there's the constraints on minerals because as you make an energy transition, what people talk about, it's more mineral intensive. An electric car uses 2 .5 times more copper than a conventional car. Well, we did the study and said, okay, let's take the 20 -50 goals.

1:21:58And if you want to achieve them, Copper supply has to double by about 2035. What's the chance of doing that? Takes 20 years to open a new mine. In the United States, we just did a study. It takes 9 years to open a new mine. So, you know, changing $109 trillion a world economy, it's going to change. And you said that development of solar is going to be really important. But things are not going to move in a straight line. I mean, we are in an energy transition, but it's going to be, you know, a longer one. Here we are, as you mentioned in Nantuck, which was a key part of the energy transition because it was a source of lighting in the 19th century from whaling.

1:22:45And it was like in the first half of a movie deck. Yeah, exactly. And then it came to an end. It came to an end because of the electric light. And so, I mean, things are not gonna stand still. So I think the most important thing is, is the technology is either that you can see coming or they come from left field like fracking or you know grasping what AI is going to mean for how our economies work. But I think you made a very important point and that was the discovery in COVID. You don't have to travel, you know, you can do it, you can do it by electrons. One of the final questions I wanted to ask you was if, um, if somebody was to write a kind of definitive history about a subject for another subject that's not energy.

1:23:31And you don't have to personally write it. You can just like delegate to somebody also do it and they'll do a good job. Is there a topic which you feel could make for another sort of thousand page fascinating history? Well, I was always actually interested. My father had worked at Warner Brothers for a time. And I was always interested in the movie in an entertainment business, you know, and how that developed and, you know, a big epic story of that. I mean, that's, I just think that's so interesting where you're again. I mean, one of the things that is fun when you're writing this, when you have these oversized personalities, there may be kind of obnoxious people who you would hate to meet in person, but are very interesting to write about.

1:24:16And so look for an industry. Here's something nobody's ever thought about. History of the internet, no, I'm just joking. But I don't know if anybody has written a sort of modern definitive history of the internet. Yeah, I mean, the thing is that, you know, the one thing I've learned from doing these books is it's the 3x rule is, however hard you think it's going to be, it's going to be at least three times as hard to do. So, I mean, I started off with really unrealistic expectations on the prize. but I think the thing that kept me going was just how great the stories are and how important the stories were.

1:24:53Yeah, I've heard this from multiple sorts of historians who have written similar definitive books about their subject. I think Kero said, like, I'm gonna write this over the summer and then we'll use the book deal to go on vacation afterwards. Right. I interviewed Richard Rose, the author of the Making and the Mentant Hand Project and similar story there, but obviously it took a longer. Well, I mean, you know, I used the advance for the prize to actually that's how I capitalized the company we started with which you know created an incentive to finish the prize. And you were doing the business in the day and then writing at night?

1:25:29Yeah, writing a weekend's vacations filling up our car with books and just just immersing it and the way I would do it is I Did not have a master plan. I really should of it would have saved a lot of time probably I would just immerse myself in my head and then my mother was a painter and I would watch her sketch. And that's the image I have is that I sketch it out. And then I fill it out and work on it. And another thing, I mean, unlike a lot of people, I love to edit and polish. I mean, I love going over it and just making a sentence better and then saying how to make it better. And then like with the prize, one of the things, I read the whole book aloud to myself, to test every sentence.

1:26:17Does every sentence have resilience? Does it, you know, does it sing? And so, you know, for me, that's a, you know, a source of pleasure to do that. Did you know while you were writing it that it would become this sort of definitive history or? No, I, you know, sometimes we were lived at an apartment overlooking the Charles River and Cambridge, I'd look out there at 2 a .m. in the morning. and think, you know, what's going to happen, you know? And I think those around me kind of a little bit despaired, you know, this could end up in a veil of tears, you know? But it turned out, you know, and then the book was basically five years late, brilliantly time.

1:27:00People said they had a great sense of time, and I said I was five years late. So, but I did have a sense that I needed to get it done. that's something that some crisis was gonna come. I had a sense of that and that drove me. But, you know, otherwise there's this danger that you just keep working on it. Yeah. Okay, I think that's an excellent place to close. Thank you. Thank you so much, Kevin. Thank you. This is wonderful. Well, it's great to have this conversation. It gave me a lot to think about too. So thank you. I