Daniel Yergin — Oil destroyed Hitler, fracking destroyed Putin

1. 0:00 – 14:21

   Beginning of the oil industry

   1. DYDaniel Yergin0:00

      There was an oil war within World War II. When Hitler invaded Russia, he was not only going for Moscow, he was also going for the oil fields of Baku. The kamikaze pilots who would fly their planes into the aircraft carrier, one big reason they were doing that was to save fuel so they wouldn't have to fly back. No one would be happier to see a ban on US shale production than Vladimir Putin. I mentioned the word shale and he erupted and kind of said, "It's barbaric, it's terrible," and he got really angry. I don't think he ever imagined that if he cut off the gas to Europe, that Europe could survive. One projection is that 10% of US electricity by 2030 will be going to data centers. A war that began with cavalry ended up with tanks and airplanes and trucks. The allies floated to victory on a sea of oil.

   2. DPDwarkesh Patel0:44

      Today, I have the pleasure to chat with Daniel Yergin. He is literally the world's leading authority on energy. His book, The Prize, won the Pulitzer Prize, about the entire history of oil. His most recent book is The New Map: Energy, Climate and the Clash of Nations. Welcome to the podcast, Doctor Yergin.

   3. DYDaniel Yergin1:03

      Glad to be with you.

   4. DPDwarkesh Patel1:04

      My first question is, a book like The Prize, it's literally a history of the entire 20th century, right? Because everything i- in the last 150 years involves oil that's happened since then. How does one begin to write a book like that?

   5. DYDaniel Yergin1:18

      I think you begin by, uh, not realizing what you're doing.

   6. DPDwarkesh Patel1:21

      (laughs)

   7. DYDaniel Yergin1:21

      I mean, I agreed to do that book and I said I'd do it in two years, it took me seven. And, uh, the stories just became so compelling and it became woven in with the history of the 20th century. And the funny thing was that some years before that, a publisher had flown up from New York to see me when I was teaching at Harvard, and, uh, said she had a very interesting idea for a book. And I said, "What?" And she said, "A history of the 20th century." I said, "That's an interesting idea," and I thought to myself, "It's rather broad," and actually the century wasn't over yet at that point. Uh, but I think... Somehow I think that was kind of in the DNA of the book. And so-

   8. DPDwarkesh Patel2:00

      Mm-hmm.

   9. DYDaniel Yergin2:00

      ... I, as I told the story, I, it really was looking... It was not the history of the 20th century, but a history of the 20th century.

   10. DPDwarkesh Patel2:08

       Mm-hmm. I, I, I found that there's a lot of books which are nominally about one subject, but the author just feels a need to, like... If you, if you really want to understand my topic, you have to understand basically everything else in the world. Um, and I think a couple of biographies especially, if you read, uh, Kiernan's biography of LBJ or Calkins on Stalin, it's just like, it, it is a, a, it is a history of the entire period in their country's history when this is happening. And I wonder if it was for you, you actually did just want to write about oil and, like, you, you just have to write about what hap- what's happening in the Middle East, what's happening in, uh, Asia. Or is it just like, no, you, you set out to write about World War II and World War I and everything?

   11. DYDaniel Yergin2:42

       I think it's also, I mean, because I think geopolitics, narrative storytelling, those are things that are very much in my interest. And my first book had actually been a narrative history of the origins of the Soviet-American Cold War. So I brought that perspective-

   12. DPDwarkesh Patel2:57

       Mm-hmm.

   13. DYDaniel Yergin2:58

       ... to it. And as I was writing the, the, The Prize, it was just... I, I didn't intend to do all of that, but the discoveries, I just... One thing led to another, and I would just be amazed and think, "This is an incredible story and no one knows it." And, uh, and I did see how somehow in my mind, you know, I did not do an, a detailed outline, but the pieces kind of came together in this larger narrative that located oil d- g- and, in this larger context of, uh, of the 20th century.

   14. DPDwarkesh Patel3:30

       Um-

   15. DYDaniel Yergin3:31

       And, and it... Because it made it clear how central oil was, uh, as a way to understand the 20th century.

   16. DPDwarkesh Patel3:38

       Yeah. So, uh, we, we'll get to the new map and the contemporary issues around energy later on. But first I want to just begin with the beginning of the history of oil. Um, one of the things you notice not only in the early stories of oil with people like Drake and Rockefeller, but also even very modern, like the frackers, like Mitchell and so forth, it's just that you have these incredibly risk-taking and strong personalities who have been the dominant characters in the oil industry. And I wonder if there's a specific reason that oil attracts this kind of personality.

   17. DYDaniel Yergin4:06

       Well, I think maybe it attracts... Those are the ones who are successful.

   18. DPDwarkesh Patel4:09

       Mm-hmm.

   19. DYDaniel Yergin4:09

       It takes a lot of, you know, willpower and perseverance. I mean, clearly Rockefeller had an idea what to do and how... But he was also creating a new kind of business organization as he's doing it, and a new kind of industry at the same time that he was doing it. And then if we jump ahead to this guy George Mitchell, who's more responsible than anybody else for the shale revolution that has transformed the current position of the United States in the world, uh, he, um... I mean, he kept at it for 18 years when people told him, "You're wasting your money. You're wasting your time." He said, "Well, it's my money and I'll waste it."

   20. DPDwarkesh Patel4:45

       Yeah.

   21. DYDaniel Yergin4:45

       But one of the things that comes through in the book is the power of willpower.

   22. DPDwarkesh Patel4:49

       Mm-hmm. One thing that really struck me is how fast things kick off. So 195- 1859, Colonel Drake hits the first, uh, oil well in Pennsylvania. And in less than a decade, you have m- many oil boom towns and oil busts and Standard Oil is formed and millions of barrels of, uh, you know, crude are being pumped out every year. Um, I, I don't know if there's been any deployment like that since. But what, what would, w- what was it like-

   23. DYDaniel Yergin5:16

       Well, well, I th- I think actually, when I think about what we saw with the oil industry, then what we saw with the automobile industry in the 1920s, is kind of what we saw with the internet-

   24. DPDwarkesh Patel5:26

       Mm-hmm.

   25. DYDaniel Yergin5:26

       ... uh, at, at the, you know, the beginning of the 21st century. Uh, you know, another example of that that always struck me is the m- movie industry. At one point, you have guys who are showing, you know, these sort of silent movies in, over, uh, vaudeville houses for five cents, and 15 years later, they're living in mansions on Long Island or, and have chauffeurs. So it is striking to sort of see these businesses that come from nowhere and then they just take off and gravitate and develop so quickly when people grab hold and in 10 or 15 years. You know, I was writing something, uh, comparing the energy position of the United States in the '80s and today. If you go back, which is, you know, it's a while back certainly, but there was no tech.... nobody talked about tech. It didn't exist. Well, and, you know, now we talk about big tech the way people talk about big oil.

   26. DPDwarkesh Patel6:16

       Yeah. So I, I, I thought the, and I, I think the analogy with the internet is interesting because what you have with the internet in the '90s, you have this big, um, internet bubble, the dot-com bubble, and a lot of people lose money. But they were fundamentally investing in something that actually was a real technology, actually did transform the world. And I think i- in many cases through energy, uh, you have investors who kind of go, uh, go broke, but they're like... Uh, I think fracking is a particularly good example of this, where they've, like, changed the geopolitical situation in the United States, but they've been, like, so right that they've, like, eaten away at each other's profits, right?

   27. DYDaniel Yergin6:49

       Right. And, and you saw that in the 19th century. I mean, that was one thing when, when I was writing about, like, the beginning of the 20th century and the end of the... I mean, it's far away and yet it felt contemporary-

   28. DPDwarkesh Patel6:58

       Mm-hmm.

   29. DYDaniel Yergin6:58

       ... because you saw a very similar pattern. You saw booms and busts, you saw trees that were gonna grow to heaven and then fell apart, and then those people who came in and either had resilience or picked things up and carried them forward.

   30. DPDwarkesh Patel7:13

       W- uh, d- in the beginning of the oil industry, uh, when it was just kerosene and used for lighting, um, why w- why, why, why was oil so centralizing? Why, why was it the case that, uh, Standard Oil and Rockefeller controlled s- so much of the-
2. 14:21 – 25:50

   World War I & II

   1. DPDwarkesh Patel14:21

      Um, let, let's go to World War I and World War II. So I ... well, w- ... th- ... you know, I, I had on the, um, the ... a couple months ago I interviewed the biographer of Churchill, Andrew Roberts, and what ... y- ... as you discuss in your book and he discusses, you know, Churchill was this sort of technological visionary and that's the side of him that isn't talked about often, um, of ... y- ... maybe talk a little bit about what Churchill did and how he saw the power of oil.

   2. DYDaniel Yergin14:48

      I think, uh, Churchill was the First Lord of the Admiralty-

   3. DPDwarkesh Patel14:52

      Yeah.

   4. DYDaniel Yergin14:52

      ... and he saw that if you can convert all the n- ... naval ships at that time ran on coal, which means you had to have people onboard shoveling coal and it took a long time to get the coal onboard, and if you switch to oil, you would have faster, uh ... the ships would be faster, they wouldn't need to take the same time, they wouldn't need to carry the same people, and so he made the decision, uh, obviously others like Admiral Jackie Fisher were pushing him, to convert the Royal Navy to c- ... uh, to oil. And people saying, "This is treacherous 'cause we'll depend upon oil from far away, from Persia, uh, rather than Welsh coal." And, um, he said, um, you know, he said, um, "This is the prize of the venture." That's where I got my title from.

   5. DPDwarkesh Patel15:36

      Mm.

   6. DYDaniel Yergin15:36

      Originally it was gonna be called The Prize of The Venture 'cause that's what he said, and then I just made it The Prize. But, uh, he saw that during war, uh, uh, World War II, World War I, he promoted another, uh, uh, military development, um, I'm forgetting of what it was called initially but e- eventually became known as the tank.

   7. DPDwarkesh Patel15:57

      Mm-hmm.

   8. DYDaniel Yergin15:58

      I mean, so he really did kind of constantly push technology. Why? I don't know. I mean, he was edu- ... you know, was not... he was not educated, uh, as that. He was educated in, you know, in the, sort of in, in classic, that's why he wrote so well. Uh, but, uh, he understood technology and that you had to kind of constantly push for advantage.

   9. DPDwarkesh Patel16:21

      Yeah. W- uh, World War I is, uh, uh, b- ... you know, World War II is just, like, who can produce the most amount of things, but World War I is especially interesting as a, a technological war because in the span of, of four or five years you have ... you go from, uh, h- ... uh, battlefields with horses to l- ... literally the tank is invented during this time and, uh, thousands ... uh, you go from hundreds to thousands of, uh, trucks and cars and planes and-

   10. DYDaniel Yergin16:45

       Yeah. I mean, it's extraordinary. I think in t- ... in 1912, the head of the Italian military said, "Planes are interesting but of no use in war."

   11. DPDwarkesh Patel16:53

       Yeah.

   12. DYDaniel Yergin16:54

       Uh, and, uh, the war did begin with cavalry charges.

   13. DPDwarkesh Patel16:57

       Yeah.

   14. DYDaniel Yergin16:58

       Uh, and it began ... the German military position was based upon the railroad. Uh, bi- ... inflexible, uh, but I was ... uh, you know, as people said, suddenly you had trucks, you had motorcycles, you had tanks, you had airplanes, uh, and so a war that began with cavalry ended up with tanks and airplanes and, and, and trucks, and, uh, it turned out that ... it was World War I, in my reading and the writing of The Prize, is what really established oil as a strategic commodity.

   15. DPDwarkesh Patel17:29

       Mm.

   16. DYDaniel Yergin17:30

       And, uh, the person who became the ... Britain's foreign secretary, uh, foreign minister, you know, said that the allies, uh, floated, uh, to victory on a sea of oil.

   17. DPDwarkesh Patel17:39

       Yeah. And I, I think even the Germans said that we would've lost ... uh, we would've won the war if it wasn't for the tank or the, the, the trucks or something like that, right?

   18. DYDaniel Yergin17:48

       E- exactly. It was the ... what the allies had is mobility that the Germans didn't have.

   19. DPDwarkesh Patel17:52

       I mean, o- one, one thing I sort of worry about w- with regards to it, it seems like today, uh, if you had a sort of World War III type conflict, the, um, the, the ... it seems like there's an overhang of new technologies just like, uh, you know, you ... there's ... uh, before World War I there was this sort of overhang of we could develop planes and war tanks and so forth if we wanted to, and with drones and other sorts of, uh, robots and other kinds of, uh, things today, it feels like if you did have a World War III today, it w- it would be fought with very different weapons by the end than the beginning.

   20. DYDaniel Yergin18:22

       Well, you know, people say that, um-... the Spanish Civil War in the second half of the 1930s was the dress rehearsal for World War II-

   21. DPDwarkesh Patel18:29

       Mm-hmm.

   22. DYDaniel Yergin18:29

       ... where a lot of technologies were, uh, and tech- uh, techniques of warfare were developed. And I think, uh, sadly, if you look at Ukraine today, uh, you see that happening today. Because on one hand, it is th- the advanced technologies. It is, uh, uh, you know, information technologies, uh, um, uh, cyber warfare, uh, and it's, of course, drones.

   23. DPDwarkesh Patel18:56

       Yeah.

   24. DYDaniel Yergin18:56

       Uh, uh, you know, in a way that hadn't been conceived, that hobby, hobby, hobby drones could become agents of war. Obviously, auto- the automation of the battlefield. But it's also, you know, a World War II bat- war in that there's been tank battles, and it's a World War I one in that it's called positional warfare, trench warfare. So you have, uh, you have, like, a whole century of warfare there, but it is certainly the, uh, the beta test for new technologies.

   25. DPDwarkesh Patel19:26

       So if we, uh, let's go forward to World War II. If, um... Wh- why wasn't Hitler able to produce more synthetic fuel? 'Cause it seems like he could have won if he had more synthetic fuel.

   26. DYDaniel Yergin19:35

       Well, I- I think you would've needed to get to a scale that they could never get to.

   27. DPDwarkesh Patel19:38

       Mm-hmm.

   28. DYDaniel Yergin19:39

       That, that was one thing, the synthetic fuel, which meant making oil out of coal, uh, uh, using a chemical process. But, uh, and the other thing is that the Allies ba- bombed the plants-

   29. DPDwarkesh Patel19:50

       Mm-hmm.

   30. DYDaniel Yergin19:50

       ... as well. But, uh, the way I thought... You know, I intended when I wrote The Prize to write one chapter on World War II.
3. 25:50 – 47:48

   The Middle East

   1. DPDwarkesh Patel25:50

      World War II in the Middle East, it's about 200 pages of, you know, initially, the w- the Western companies make these deals with, um, exporting countries and over time what happens is that first it's just, like, an incredibly favorable deal towards the Western companies, but then the exporting countries are like, "No, we've got to do the 50/50 split," and then they do the 50/50 split. And then it just, over a couple of decades what happens is that they just keep asking for more and more concessions. Instead of fi- we n- we want 55, uh, we want 60%. This is the exporting countries I'm talking about. And, um, they, they form the cartel obviously, OPEC in, uh, in 1960, but even before that, it just, like, uh, w- what, what they have, they have leverage over these Western companies in the sense that they can say-

   2. DYDaniel Yergin26:35

      Yeah.

   3. DPDwarkesh Patel26:35

      ... like, "If you don't agree, we'll just nationalize you." So-

   4. DYDaniel Yergin26:37

      Yeah. Yeah.

   5. DPDwarkesh Patel26:38

      ... you might as well just give us five-

   6. DYDaniel Yergin26:38

      Uh, uh, uh, I had a, uh, a mentor, an ec- economist named Ray Vernon who came up with this term, the obsolescing bargain-

   7. DPDwarkesh Patel26:45

      (laughs)

   8. DYDaniel Yergin26:45

      ... which is, uh, Dorkash Oil invests in such and such a country. And, uh, you put, uh, $2 billion in there and it's great and everybody's very happy. Governments change or times change and people forget the risk that you took to do it, and they say, "We want a different deal." And that just happens again and again and again. It happens with, uh, all the, all natural resources. With oil, uh, with minerals. And then it was also you had, um, you know, it was the end of colonialism, countries becoming independent. Today, if you, if a company makes a deal with a country to go develop oil, the country will take ... gets 80% of the profit.

   9. DPDwarkesh Patel27:23

      Yeah. W- so if you're, if you're one of these Western companies, what should you ha- Like, you, it's, let's say it's 1950, um, and you know that over time you're gonna, you know, they're, they might, they have obviously the monopoly of violence so they can na- nationalize you if they want. What should you have done so that you can basically prevent the outcome that, kind of, universally happened?

   10. DYDaniel Yergin27:42

       Well-

   11. DPDwarkesh Patel27:43

       If, if you were in charge of ...

   12. DYDaniel Yergin27:45

       Yeah. Probably, I mean, you would obviously you work really hard on government relations, but the gov- the countries are, you know, generally poor and they say, "Well, we, we just want our sh- it's our resource. We want our share of it." So I think over time ... Now which you have as a company then, you had the access to the market, you have the refineries, you have the tankers, so it isn't like they can just take it over and they don't necessarily also have e- it takes time to train your population to, uh, to develop your indigenous, uh, oil people who can, who can run it. But, uh, you know, if you look back on it, uh, I think you just say, you know, there was an inevitability to it which also had to do with the consolidation of nation states.

   13. DPDwarkesh Patel28:30

       Why didn't, um, why didn't the US 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, like, negotiate that hard, but, you know, we really care about making sure that America has a lot of oil"?

   14. DYDaniel Yergin28:42

       You know, I think the governments did, you know, back up and I think the British ... Remember, the British owned, uh, a big share of British Petroleum, now BP, until the late 1980s. So, you know, the British government was in there, but then you had the nationalization of, uh, what was g- then called Anglo-Persian, Anglo-Iranian Oil, which became BP. Uh, so I think it was, I think it was inevitable, but I think the governments did try and support but there were, you know, what, there were limits that, uh, that they could do. I mean, but, you know, the question of access of maintaining the supplies, uh, then and now, uh, remains, uh, that question of access remains crucial, uh, today. I mean, you have the US Navy today trying to, um, uh, push back on the Houthis, uh, the, uh, in Yemen, who are attacking oil tankers.

   15. DPDwarkesh Patel29:44

       Uh, c- thinking purely from the perspective of the companies, if you were in charge of one of th- uh, one of the majors, uh, would you have refused to train domestic workers in the exporting country?

   16. DYDaniel Yergin29:54

       No, I think, I think that was part of your way of trying to, uh, embed yourself there to-

   17. DPDwarkesh Patel29:59

       Mm-hmm.

   18. DYDaniel Yergin29:59

       ... uh, to bring them in so that you were not this isolated i- island.

   19. DPDwarkesh Patel30:05

       Mm-hmm.

   20. DYDaniel Yergin30:06

       Um, and, you know, if you do look at, you know, Venezuela, uh-... uh, and nationalized its comp- you know, the oil operations. But by that point, they had people who were very well-trained at running refineries, at drilling, at finding oil. Uh, and so ... And 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 Chávez came to power.

   21. DPDwarkesh Patel30:33

       Mm. Was, um, was the continuation of antitrust in oil after World War II? W- was that a mistake? Because what happens often when I'm reading your book is like, uh, the, the, the oil-producing countries can negotiate together. Obviously, after OPEC, they, they're literally a cartel. But then these different Western companies, they can-

   22. DYDaniel Yergin30:50

       Well, in, in 1973, finally, the US government did give an antitrust 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, uh, Arab-Israeli wars and so forth. So it wasn't just about oil. There were other things going on and, uh, the use of what was called the oil weapon.

   23. DPDwarkesh Patel31:11

       Yeah. Okay. So let, l- let's talk about the, the, the oil crisis in 1973. Um, 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, uh, declined. Why did that have such a huge effect?

   24. DYDaniel Yergin31:25

       This was completely unprecedented, unexpected, so it created a panic, and it was also right towards, you know, as the cr- uh, the, you know, the, the f- the final months were coming of the Nixon administration. So it got all tangled up. And there ... And then we had this system of price controls, uh, uh, and allocation controls, which made it much harder for the market to a- a- adapt. I mean, one of the lessons f- to me from The Prize is actually enabling markets to adjust-

   25. DPDwarkesh Patel31:58

       Yeah.

   26. DYDaniel Yergin31:58

       ... because when governments try and control them and make decisions and allocate, uh, and governments, even in the United States, and some states want to do that today, it, it, it accentuates shortages and disruptions and price spikes. But the tendency is to, uh, uh, want to control them. But I think there was just a, you know, there, it w- there was far less knowledge about, uh, the market, where supplies were. There was no sort of coordination. Now there's much greater-

   27. DPDwarkesh Patel32:27

       Mm.

   28. DYDaniel Yergin32:27

       ... knowledge and trans- transparency. I mean, it was just, uh ... And you had what were 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.

   29. DPDwarkesh Patel32:43

       I see.

   30. DYDaniel Yergin32:43

       And that systems is gone. When you see the names of, um, the big oil companies on a gas station, if you're not driving an electric car and you pull in, uh, odds are that it's not owned by that company there. It's a franchise.
4. 47:48 – 1:05:20

   Yergin’s conversations with Putin & Modi

   1. DPDwarkesh Patel47:48

      Prize, you're like ... All the world leaders are inviting you to come meet them and give advice and so forth. I don't know how m- how many stories you can tell from these sorts of conversations, but is, is there some, uh, person who, like, really struck you as they've got their head on straight on these kinds of issues, or ... Um, I don't know. Just, like, uh, you- you've been all around the world. I- I- I'm just curious if you have some sort of crazy stories about it.

   2. DYDaniel Yergin48:07

      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, uh, whether to get out of ... And the book, you probably don't know that I did, called The Commanding Heights, in the permit raj, uh, where government really tightly controlled the economy.And, you know, I describe a scene in the book where, uh, he brought his senior advisors together to argue about whether you allow market forces to work or not. And, uh, it was a very heated discussion. And then I just remember his remarks. He goes, "We need new thinking." And that, you know, just those simple words, I think, uh, have pointed to how India's become so much of a bigger force in the world economy today, as opposed to being a sort of enclosed, uh, uh, closed economy.

   3. DPDwarkesh Patel49:05

      So i- i- in 1973, uh, b- b- oil crisis. Before that, if you look at the sort of-

   4. DYDaniel Yergin49:11

      We're back to 1973? I thought we were already in 2024. Okay. (laughs)

   5. DPDwarkesh Patel49:15

      (laughs) We're moving around.

   6. DYDaniel Yergin49:16

      Yeah.

   7. DPDwarkesh Patel49:16

      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, uh, pretty high for, uh, a- a long time, you know? It's like 2%, uh, total f- factor productivity growth before 1970s. And then afterwards, it's, like, less than 1% in the United States. Uh, how much of that is tied to the energy crisis or did they... W- was that just a coincidence?

   8. DYDaniel Yergin49:44

      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, had that slowdown that occurred. Uh, but it was a... Y- you know, the US went from a, you know, being on a very strong growth trajectory, uh, went into, you know, what at that time was the deepest recession since the Great Depression.

   9. DPDwarkesh Patel50:08

      Yeah.

   10. DYDaniel Yergin50:08

       Of course, we've had deeper recessions since then. And, you know, it took... You know, it took a decade to get out of t- d-... It took a decade to dig out of that hole.

   11. DPDwarkesh Patel50:17

       Um, but then y- uh, I mean, the rates of economic growth didn't go back to, uh, pre- 19-

   12. DYDaniel Yergin50:23

       Well, also the US, the US was a... You know, as it, your economy becomes bigger-

   13. DPDwarkesh Patel50:27

       Yeah.

   14. DYDaniel Yergin50:27

       ... you don't grow at the same rate, but you're growing off a much larger base.

   15. DPDwarkesh Patel50:31

       Uh, o- one of the things in, uh, Silicon Valley that these techno-optimistic 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, um, the economy's bottlenecked by the price of energy, or would it just, would it not be a big deal because there's other bottlenecks?

   16. DYDaniel Yergin50:53

       Well, I don't think... Uh, 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 a, somewhat of a constraint in California because it has the most expensive energy in the country, but that's because of state regulation.

   17. DPDwarkesh Patel51:18

       Yeah.

   18. DYDaniel Yergin51:18

       Uh, but, um, you know, all of the big tech... Uh, b- you know, big tech wasn't born in 1973. It was much more recently-

   19. DPDwarkesh Patel51:29

       Yeah.

   20. DYDaniel Yergin51:29

       ... that it's happened. I mean, it is, you know, like the oil industry, it's happened pretty quickly actually in this space of time. Um, and, uh, so I don't think... I mean, I think when you have price spikes, when you have disruptions, then that's when you s- see the cost and those, 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. Um, I'd need to think about it more, but I don't think it's, you know, a huge constraint. Now, maybe, you know, nuclear energy way back in the 1950s was supposed to be so cheaped to m- so cheap that you wouldn't meter it. "Too cheap to meter" was the phrase.

   21. DPDwarkesh Patel52:16

       Yeah.

   22. DYDaniel Yergin52:17

       Uh, and, you know, now there's the, you know, fusion, which seemed to be 50 years away is now maybe 10 years away. And, y- you know, I, I think technology will, will change things. Um, but, you know, I don't think... Uh, y- you know, electricity may be a constraint on the growth of AI in the, in the near and the medium term, but that's a very specific problem.

   23. DPDwarkesh Patel52:43

       There's been different projections made about how much energy will be required for AI, but, you know, the big thing is they need these big training runs and they keep getting bigger and bigger over time.

   24. DYDaniel Yergin52:52

       I 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.

   25. DPDwarkesh Patel53:00

       Yeah.

   26. DYDaniel Yergin53:00

       And it's about 4% today. What a change 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, uh, utility CEOs about a year ago, and they were talking about growth, 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 US electricity to 10%. And US electricity hasn't grown very much over the last, uh, 10 years. It's grown at 0.35%. Now you're looking at maybe it's gonna grow at 2% or more. And that, that adds up very quickly. And I was very struck. Uh, I did a discussion with Bill Gates at our CERAWeek conference in March, and he said, um, "You know, we used to talk about data centers as 20,000 CPUs." He said, "Now we talk about them as 300 megawatt-"

   27. DPDwarkesh Patel54:01

       Yeah.

   28. DYDaniel Yergin54:02

       "... uh, uh, uh, data centers." And the sense is that-You have electric cars and sort of energy transition demand, then you're bringing back, uh, chip manufacturers and, uh, smart manufacturing in the United States, that's electricity demand. Then you have AI and data centers, and suddenly this industry that had been very flat is now looking at growth, and how you're gonna meet the growth is very much on the, uh, agenda right now. Um, 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, uh, 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, uh, on, uh, economic activity.

   29. DPDwarkesh Patel54:57

       Yeah. And are you-

   30. DYDaniel Yergin54:57

       Now- now let me say, the anw- 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. So there is those who say, "That will happen," but it hasn't happened yet, and those who are saying, you know, "How are we gonna, how are we gonna meet that demand?" Uh, and, uh, you know, AI's gonna demand a lot more electricity than- than, you know, than we had thought about a year or a year and a half ago.
5. 1:05:20 – 1:11:10

   Writing through stories

   1. DPDwarkesh Patel1:05:20

      um, a n- narrative, uh, are, are, you know, narratively driven, and you have detailed understanding of, like, people and, uh, people and events and so forth. Um, as compared to somebody who's just like, "Here's how many barrels were produced in year X, here's how many barrels were produced in year Y," uh, do you feel like when you're i- in these conversations where you're, like, trying to think about the future of energy, like really, you really need to know what the f- uh, what, uh, dr- how, how Drake was thinking about the, uh, drill well and how, uh...

   2. DYDaniel Yergin1:05:50

      Yeah. I'm, I mean, I think, uh, in one way, I, I see myself as a storyteller, as in I like narrative. I, 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, a movie when I'm writing, you know, I, I see what's happening and that makes it more vivid for me.

   3. DPDwarkesh Patel1:06:17

      Hmm.

   4. DYDaniel Yergin1:06:17

      And, uh, I also think that, um, you know, there are more and more things you're competing with, uh, if you're, if you're a writer. Uh, you're competing with TikTok, you're competing with, uh, YouTube and everything.

   5. DPDwarkesh Patel1:06:32

      Yeah. Podcasts. (laughs)

   6. DYDaniel Yergin1:06:33

      S- and podcasts. So, you know, you've gotta draw people in, and people love stories. I, I, I mean, I mean, I've been... This is... I, I started writing when I was, like, a child.

   7. DPDwarkesh Patel1:06:45

      Mm-hmm.

   8. DYDaniel Yergin1:06:46

      You know, I, my father had an old typewriter, he'd been a newspaper reporter, and I would hunt and peck and just, you know, write stories. You know, so in high school I was student body president, but I was also editor of the literary magazine, and, uh, and when I was an undergraduate at Yale, I started a magazine called The New Journal, which was narrative journalism. And, uh, you know, so I learned, 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, um, I love shaping a story. I love finding a character. I love finding the great quote that just kind of illuminates everything-

   9. DPDwarkesh Patel1:07:28

      (laughs)

   10. DYDaniel Yergin1:07:28

       ...you're trying to do. And, uh, and I love, uh, not boring people. (laughs)

   11. DPDwarkesh Patel1:07:33

       When you were writing The Prize, it's, it's a seven-year process where there, um, there's the endurance, but there's also, like, the sense of you, you gotta have, like, faith that-

   12. DYDaniel Yergin1:07:42

       Yeah.

   13. DPDwarkesh Patel1:07:43

       ...at the end of this (cries)

   14. DYDaniel Yergin1:07:43

       Yeah. You're making a deal with yourself. (laughs)

   15. DPDwarkesh Patel1:07:45

       Yeah.

   16. DYDaniel Yergin1:07:45

       You're making a deal that what you write in year four, you're not gonna totally rewrite in year seven.

   17. DPDwarkesh Patel1:07:50

       (laughs)

   18. DYDaniel Yergin1:07:50

       'Cause 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, you know, sometimes people, when they go back and write history, they know the outcome, so they 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, you don't, you never have all the information, you certainly don't have all the time, and you surely don't know the outcome. And I think that sense of contingency, uh, which is such a part of human history, I think, I feel I tried to captur- 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, and The, The Quest, the middle book, you know, is a question, "Where the hell did the modern solar and wind industry come from anyway?" And, you know, sort of entrepreneurs. And so I've, you know, 'cause I have been an entrepreneur, you know, I have a, uh, uh, a feeling for it. I mean, you're an entrepreneur in terms of what you're doing with podcasts. You, you sort of invent it as you go along.

   19. DPDwarkesh Patel1:09:00

       Yeah.

   20. DYDaniel Yergin1:09:00

       And, uh, I tried to capture that. At the same time, I love writing narrative. (laughs)

   21. DPDwarkesh Patel1:09:09

       Well, uh, the thing I'm curious about is if, um, let's say you meet, uh, an- another analyst who doesn't have a, a vivid sense of narrative history, um, but just, like, knows the facts and figures, what, what is it that they're missing? What, w- what did you, what did they, w- what, what kinds of understanding do they often lack when you talk to them and so forth?

   22. DYDaniel Yergin1:09:25

       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 from the Department of Energy, which is only statistics-

   23. DPDwarkesh Patel1:09:37

       Yeah.

   24. DYDaniel Yergin1:09:37

       ...or the stati- st- energy, the Statistical Energy Review, so I, I love it. But I think, um, what you may miss is, uh, the contingency-

   25. DPDwarkesh Patel1:09:49

       Mm-hmm.

   26. DYDaniel Yergin1:09:50

       ...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-

   27. DPDwarkesh Patel1:09:58

       Yeah.

   28. DYDaniel Yergin1:09:59

       ...you know, that you were wrong about or that would've been wrong. So I think, um, so it's, you know, it's, it's, it's the texture. I mean, there is a tendency to think th- that things are inevitable, but you know that the world can change from one day to the next.

   29. DPDwarkesh Patel1:10:17

       Yeah.

   30. DYDaniel Yergin1:10:18

       That's what happened on, you know, December 7th, 1941, uh, September 1st, 1939. It could happen any day in the Middle East, uh, right now, that you could go from one day to the next, uh, and it's a d- different world.
6. 1:11:10 – 1:18:39

   The renewable energy transition

   1. DPDwarkesh Patel1:11:10

      uh, y- uh, with, with oil, you have a c- a commodity which is, which is a flow and you can cut it off and you can turn it back on again, so it gives 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, you just, it has... How does that change the, um, the geopolitical situation and the kinda leverage that the producer might have?

   2. DYDaniel Yergin1:11:30

      You know, 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, "Vari- safety lie in variety and variety alone, diversification." So wind and solar give you diversification. Uh, electric vehicles diversify your, your fleet. Uh, so I think those are all there. Uh, I think, um... 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, uh, you know, the, 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. So, uh, so those are the strategic things. But wind and solar give you a more diversified system, uh, until you have batteries that can really deliver the storage, uh, you have the intermittency problem. So you take California today, people think wind and solar's advanced. It's true, they're 25% of your electric generation in California, but 43% of electric generation comes from natural gas. So, uh, you know, natural gas, and that gets back to the data centers, you know, you're gonna need to bolster your electricity power system. How much can you do with batteries and how much can you do with, uh, and using natural gas? So, uh, but, you know, wind and solar are also s- stories about entrepreneurship and, and the quest I have, you know, I, I ask myself, "Where did the wind and solar industries come from?" And the wind and solar industries came from two, the wi- the solar industry from two, uh, 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, uh, for the US government and he and his partner decide to go in the solar business, uh, and, uh, that became the first solar company, and they started it in 1973. And the wind business, I like to say the modern wind business is a 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, when the wind blew in the Tehachapi Pass. And, uh, so but it took, you know, it's interesting, it took them 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 are also now tied up in geopolitics, and, you know, when I called the new map, the movement, uh, to, you know, the great power of competition. There's the U- US just put 100% tariffs on Chinese electric cars, 25% tariffs on Chinese storage batteries. So, you know, if you, we just had this bill, the Inflation Reduction Act, not just, it's very recent, huge, you know, trillion dollars people, the Treasury estimates when it's done. But, uh, it's about climate and renewables, oh, but it's also about competing with China.

   3. DPDwarkesh Patel1:15:07

      Speaking of solar deployment, so solar is on, um, I think solar deployment is on an annualized $500 billion, uh, uh, that's the yearly, you know, 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, this scale of deployment? Maybe initially electrification or, or is this just unprecedented s- uh, scale?

   4. DYDaniel Yergin1:15:35

      I'd have to think about it. I mean, it's, it's happening fast but, you know, as I say, these guys started the solar business in 1973. It's, it's now taken off. It's also interesting that what really gave the boost to, uh, the solar industry is German feed-in tariffs which provided the incentive for the Chinese to dominate, to develop-

   5. DPDwarkesh Patel1:15:59

      Mm-hmm.

   6. DYDaniel Yergin1:15:59

      ... because they dominate the business. Uh, uh, and, um, but, you know, you know, solar, I mean, right now wind is about 10% of US electricity, solar's about three and a half percent, but solar's gonna grow, it certainly will grow very fast.

   7. DPDwarkesh Patel1:16:16

      Yeah.

   8. DYDaniel Yergin1:16:17

      You do see, um, uh, and I just heard this when I was at this utility commissioner's 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.

   9. DPDwarkesh Patel1:16:30

      Yeah. I, I think, we're in Nantucket and I, I saw a couple of signs around of, you know, "No more wind."

   10. DYDaniel Yergin1:16:35

       Well, they just had a thing where one of the whip blades off one of the big wind turbines ended up, fell off and washed up on the beach-

   11. DPDwarkesh Patel1:16:41

       Ah.

   12. DYDaniel Yergin1:16:42

       ... and has now created, you know, uh, it's really huge in consternation-

   13. DPDwarkesh Patel1:16:46

       Yeah.

   14. DYDaniel Yergin1:16:46

       ... and suddenly reopened the discussion. But, you know, you need supply chains, and wind and solar are a little d- are different, of course.

   15. DPDwarkesh Patel1:16:53

       Yeah.

   16. DYDaniel Yergin1:16:53

       I mean, 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 there are the supply chain issues.

   17. DPDwarkesh Patel1:17:07

       Mm-hmm.

   18. DYDaniel Yergin1:17:08

       Solar is different, but of course solar is, you know, is so dominated by China.

   19. DPDwarkesh Patel1:17:13

       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-

   20. DYDaniel Yergin1:17:24

       Oh, that's very interesting-

   21. DPDwarkesh Patel1:17:25

       ... is that a mistake?

   22. DYDaniel Yergin1:17:25

       ... 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, we can do offshore wind." And you see that in Europe where, where, uh, Equinor, which is the Norwegian company, or BP or Shell or Total are, you know, big in offshore wind, um, and they say, "We have skills in that." Uh, solar's a little different. Exxon is now going into mining lithium, thinking that they can use skills that they use for, uh, that. But the US c- major companies say, "Well, we do, basically we do molecules, we don't do electrons." And th- that's where the difference is. These European companies say, "We can do all of it." The European, the, the Europeans say, "We can do all of it." The American companies say, "Well, you know, we have no comparative advantage in electrons." Uh, but, but there's a lot of interest in hydrogen because that's another molecule, uh, and can, to a degree hydrogen can substitute for, uh, natural gas, for instance.

   23. DPDwarkesh Patel1:18:26

       Mm-hmm.

   24. DYDaniel Yergin1:18:27

       And that's where a lot of investment, but it's very early and, you know, again, things, sometimes people forget about the energy business, it's scale, it's so big as-... you know, what the requirements are.

Episode duration: 1:28:16