WASHINGTON — Daniel Yergin, an oil and gas expert whose 1990 book “The Prize” is still considered required reading for anyone who wants to understand the industry, on Wednesday won government recognition for helping to illuminate the mysteries of energy policies, politics and production.
The Department of Energy presented Yergin with its first-ever James R. Schlesinger Medal for Energy Security during a ceremony in the nation’s capital. The prize is named for the nation’s first energy secretary who is widely credited not just with standing up the department but also making international concerns and security a big part of the conversation around energy. Schlesinger died in March.
“He brought a strategic vision and security framework to bear on these issues,” Yergin noted in accepting the medal Wednesday. “He’d been a defense strategist and a student of international affairs, and he saw how those things were linked with energy.”
Yergin won the Pulitzer Prize for “The Prize: The Epic Quest for Oil, Money & Power,” and has since followed that tome up with another: “The Quest: Energy, Security, and the Remaking of the Modern World.” Now vice chairman of the research firm IHS, Yergin also presides over the annual CERAWeek conferences he launched more than three decades ago.
Energy Secretary Ernest Moniz credited Yergin with making “unique contributions to the energy security debate.”
“His writings, from ‘The Prize’ to ‘The Quest,’ have provided the historical perspective for understanding today’s energy security challenges,” Moniz said. “His emphasis on energy market structures as a critical energy security consideration is an important part of America’s energy and security policy conversation.”
Yergin on Wednesday insisted that energy security now means much more than just supply.
While the United States energy picture has radically changed in recent years — with technological advancements driving oil and gas production to near-record levels — Yergin worries about turmoil around the globe undermining the domestic improvements. And he wants the United States to do a better job preparing for the energy disruptions on the horizon — be they cyberattacks or natural disasters that cut off oil and gasoline flows.
We talked with Yergin about changes in the energy landscape, threats around the globe and whether today’s shale drilling revolution has busted ‘peak oil’ fears.
FuelFix: Keeping in mind that the Schlesinger medal honors contributions to understanding of the threats, policy choices and opportunities affecting energy security, how have our opportunities and policy choices evolved since you wrote “The Prize?”
Daniel Yergin: As a country we are in a much better position. When (Schlesinger) took up the mantle and created the Department of Energy, we were really caught up in this panic, because Americans didn’t realize we were importing oil, and suddenly to find we were importing a lot of oil. It was really such a big challenge to the position of the United States in the world. It was very much at a time when there a very powerful shortage, a permanent shortage mentality.
One big change is this unconventional revolution in the United states. Since 2008 our oil production is up 70 percent, Texas oil production has gone from 1 million to 3 million barrels a day, it produces more oil now than Mexico. “We have a more diversified energy economy, wind is part of our energy mix and solar too. We’re in a much better position.
Another big change is recognizing that all the growth in energy demand is not going to be in the U.S. and other industrial countries, it’s going to be in the emerging markets. What does that mean for markets and policy? There’s a constant struggle for confidence in markets, and for me, the lessons of the previous crises is the importance of allowing markets to re-balance and adjust, rather than trying to have a decision maker makings decisions.
Another difference of course is the sharp animosity that existed between producers and consumers has really eased a great deal, there’s more of a sense that they have mutual interest. The ’70s were a time of real confrontation, North-South, producers-consumers, and there’s a greater recognition that we’re all more or less in the same boat.
FF: The United States is in a much better position. While there’s always a risk of complacency, what do you think is the biggest challenge facing the nation?
Yergin: There’s a famous comment Schlesinger made: We veer between panic and complacency. We need to find a middle ground between them.
The focus on energy security is now much wider than it was in the past. (Previously,) it was really, focused on destruction of oil supplies by hostile elements and now, you can think about energy security in terms of physical security — the transmission system and the whole logistical chain — you can think about it in terms of cyber, you can think about it in terms of responding to and preparing for integrated energy shocks like what happened after Rita and Katrina in the Gulf Coast and what happened with Superstorm Sandy in the Mid-Atlantic states.
The whole system is so interdependent and interconnected. When we think about energy security we have to think about it in a broader fashion and try to anticipate the next unexpected crisis before it arrives.
FF: You’ve talked a lot about the export ban being a relic of the past. Is the whole notion of peak oil outdated too? Will oilfield technology always find a way, even with a finite resource?
Yergin: It’s never wise to say ‘always.’ Every few years the conventional wisdom changes. And there’s a big challenge of demand growth that’s going to come from the developing world and how is that going to be met. And so far the unconventional revolution is a North American revolution we really haven’t seen much evidence of it elsewhere.
What’s happened in the United States has been quite remarkable but it shouldn’t be a source of complacency. That extreme peak oil view has really dissipated; how can you worry about peak oil when you see us oil production up 70 percent in six years. But it’s still early days; we still have to see how this plays out over five or 10 years.
FF: Are there things that make you nervous?
Yergin: The geopolitics make me nervous. The optimism of the Arab Spring is long gone. The Middle East is unstable and we’re back there again. Nigeria is under a lot of pressure. You see in many parts of the world, there’s a lot of risk.
We’re at loggerheads with Russia right now. Even so, the energy balances for the years ahead require Russia to maintain or increase its production. We’re in the 10th month of 2014; all of the things that were not anticipated at the beginning of 2014 have happened: Russia, Ukraine, ISIL and of course Israel and Gaza.
What is striking in all of that — one difference from other periods — is that the price of oil hasn’t been a register of anxiety about these crises.
FF: What should energy consumers, who may not spend tons of time thinking about energy production and policy, know about where the United States is today?
Yergin: As consumers, maybe we’re not as aware of how important this energy boom has been to our ability to crawl out of a recession.
Also, gasoline prices are set by the world market, not by U.S. crude prices. It’s not just back to the ’70s but it goes back to 1922: Gasoline prices are an incredibly sensitive political issue.
For me, one of the enduring lessons of writing “The Prize” was you have all these characters, but at the end of the day there are two most important characters: One is named supply and one is named demand. People don’t understand that actually, markets generally do work.