Daniel Yergin, the Pulitzer Prize-winning historian and energy expert, was already working on a book about how, in the relatively short span of a decade, the world had become a very different place: The U.S. was now the world’s leading producer of oil and the tone of relations between Washington and Beijing had flipped from “engagement” to “strategic rivalry.”
Then this spring, while Saudi Arabia and Russia — the rest of oil’s new Big Three — were flooding the market in a price war, Western economies suddenly went dark for weeks at a time to slow the spread of the coronavirus. The sudden drop in demand amid excess supply briefly sent prices negative — traders were paying to have oil taken off their hands.
President Donald Trump finally negotiated a truce “to stabilize the price and prevent a total collapse of the industry, particularly the United States, which would have had deep economic reverberations across the entire economy.”
That shock to the oil markets put extreme urgency on Yergin’s analysis that the industry was no longer defined by OPEC. By historian standards, this book — The New Map: Energy, Climate, and the Clash of Nations, released last week — was ripped from the headlines.
Normally, he finishes a book nine months before it comes out, he said. This time, he was making edits into the second week of July — less than nine weeks ago.
It’s too soon to say when we’ll have an effective COVID-19 vaccine or herd immunity, and no one can know whether the recovery will be tepid after so many small businesses have closed or if it will unleash pent-up activities, like after World War II.
But it seems clear that new paradigms are emerging around office space and business travel that will have myriad effects, and many will be felt by the auto industry.
The American workplace has been through “six years of digitalization compressed into six months.” The work-from-home trend most certainly reduces commuting miles, he said, and has workers subsidizing their employers’ real estate and utility costs.
Similarly, technology has given business travelers a flexibility that really didn’t exist before.
“People will make the decision whether they want to travel digitally or travel by jet plane,” he said.
While 2020 has strained many household Wi-Fi and cellular networks, Yergin mused about how rapidly capabilities have expanded:
“If this had happened a decade ago, we wouldn’t have been able to adapt the way we have today.”
It wasn’t much more than a decade ago when the trajectory of the energy industry changed dramatically. “Entrepreneurs, technologists — stubborn people — pursued this thing called hydraulic fracturing and horizontal drilling, otherwise known as fracking. Going against what every petroleum engineering textbook said created a disruptive technology — fracking — and it carried the United States from being the largest importer of oil in the world to being the largest producer of both oil and natural gas. And it all happened very quickly over a decade.”
The electrification of terrestrial transportation is on a longer curve than that. He said IHS Markit, where he is vice chairman, projects that 60 to 80 percent of the global auto industry will be electrified by 2050. Even if there’s a strong consumer pull for electric vehicles when the technology is more economical than a gasoline-burning auto — projected to happen this decade — when all industries are converting, demand for minerals will raise costs and slow progress, he said. “You really have to look at the supply chain,” he said. To get to a net-zero carbon world, “we’re gonna have an era of Big Shovels.”
While political rhetoric can change quickly, manufacturing footprints and energy infrastructures generally don’t.
The contentious view of China by both Republicans and Democrats — and its reciprocity from Beijing — is challenging for U.S. companies such as General Motors and Tesla that have a significant chunk of their operations in the industry’s largest market. It’s not great for Volkswagen or Mercedes or Volvo, either.
“There are a lot of positives to the economic relationship between China and the United States, as well as the negative issues,” Yergin said. “And it’s important not to forget the positives because they’re very significant to industries like automobiles.”
The world keeps changing, sometimes rapidly. So it’s important to step back now and then to take in the big picture.
“The New Map is really how we think about the world — that picture of the world we have in our minds,” he said. “And I think that in a sense, this book is a cautionary tale about being realistic about the whole relationship.”