Daniel Yergin — Oil destroyed Hitler, fracking destroyed Putin
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𝐄𝐏𝐈𝐒𝐎𝐃𝐄 𝐋𝐈𝐍𝐊𝐒 * Transcript: https://www.dwarkeshpatel.com/p/daniel-yergin * Apple Podcasts: http://apple.co/3RFuS7b/ * Spotify: http://spoti.fi/3APeQ3L * Me on Twitter: https://x.com/dwarkesh_sp
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𝐓𝐈𝐌𝐄𝐒𝐓𝐀𝐌𝐏𝐒 00:00:00 – Beginning of the oil industry 00:14:21 – World War I & II 00:25:50 – The Middle East 00:47:48 – Yergin’s conversations with Putin & Modi 01:05:20 – Writing through stories 01:11:10 – The renewable energy transition
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Yergin argues that energy—particularly oil—is the central driver of geopolitical power, economic development, and historical change, and that understanding energy requires narrative history that captures contingency, human agency, and the strategic decisions of key actors rather than abstract statistics alone.
- Oil's role in World War I established it as a strategic commodity; the Allies 'floated to victory on a sea of oil' and mobility derived from oil-powered vehicles defeated static German positions
- The shift from integrated oil companies to market-based pricing after 1973 fundamentally changed the dynamics of energy security and geopolitical leverage
- Energy transitions are fundamentally different from other technological shifts—they require energy addition rather than replacement, making the current transition to renewables unprecedented in scope and speed
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John D. Rockefeller was fundamentally a merchant of lighting through kerosene, not a merchant of mobility; he became the richest man in the United States by controlling the lighting market before gasoline became important, and when Thomas Edison's light bulb threatened the kerosene business, the automobile market (created by Henry Ford) emerged to replace it.
“John D. Rockefeller was a lighting merchant. What they did is that they rolled back the darkness with kerosene, with lighting. Before that, the number one source of lighting was candles and whaling.”
The Standard Oil antitrust breakup, while famous, actually led to greater wealth for John D. Rockefeller as a shareholder; the individual parts of Standard Oil became valued separately in the marketplace, making Rockefeller three times as rich as a shareholder than he had been as a unified company owner.
“as a result of that John D. Rockefeller as a shareholder actually became three times as rich.”
Admiral Nimitz stated that if the Japanese had come back a third time and hit the oil tanks at Pearl Harbor, World War II in the Pacific would have taken another two years.
“When the Japanese bombed Pearl Harbor, Admiral Nimitz, who was the naval commander, said if they'd come back a third time and hit the oil tanks, World War II in the Pacific would have taken another two years.”
Standard Oil controlled approximately 90% of the refining business in the United States, and Rockefeller's strategy was to control the refining market (not land ownership and drilling) because refining provided access to the market and gave producers no choice but to sell to Standard Oil.
“There were a few other people but Rockefeller controlled about 90% of the business. He would either give you a good sweating—drive down prices and force you out of business—or force you to sell to him or amalgamate with him.”
Churchill, as First Lord of the Admiralty, made the strategic decision to convert the Royal Navy from coal to oil power, which made ships faster and more efficient by reducing the need to carry coal and coal-shoveling crew; this decision was controversial because it meant depending on oil from Persia rather than Welsh coal, but Churchill argued 'This is the prize of the venture.'
“Churchill was the First Lord of the Admiralty. All the naval ships at that time ran on coal, which means you had to have people on board shoveling coal. It took a long time to get the coal on board. If you switched to oil, the ships would be faster.”
Churchill promoted the development of the tank during World War I and constantly pushed for new military technologies because he understood that maintaining technological advantage was crucial; though he was educated in the classical sense and not trained in technology, he grasped the importance of continuous technological innovation for military superiority.
“During World War I, he promoted another military development. I'm forgetting what it was called initially, but it eventually became known as the tank. He really did constantly push technology. Why? I don't know. He was not educated like that. He was educated in the classic sense. That's why he wrote so well. But he understood technology and that you had to constantly push for advantage.”
Putin explicitly opposed shale development in 2013 before annexing Crimea; when asked about shale at a global economic conference, he erupted and called it 'barbaric' and 'terrible,' revealing that he was concerned about shale gas competing with Russian gas exports and weakening Russian geopolitical influence.
“No one would be happier to see a ban on US shale production than Vladimir Putin. I have firsthand sense of that. In 2013, before he annexed Crimea, I was at this conference, which was his version of a global economic conference. They said I could ask the first question... I mentioned the word 'shale' and he erupted and said, 'It's barbaric, it's terrible.' He got really angry in front of 3000 people.”
The modern wind and solar industries originated from entrepreneurship: the solar industry was founded by two émigrés, one who drove out of Hungary during the 1956 revolution; they started the solar business in 1973, and it took about 30 years (until 2010) to become competitive with conventional energy.
“Wind and solar are also stories about entrepreneurship. In The Quest I asked myself, where did the wind and solar industries come from? The solar industry came from two émigrés who had left Europe, one of whom had driven his car out of Hungary in the 1956 revolution. In 1969, he's a chemist working for the US government. He and his partner decided to go in the solar business. That became the first solar company. They started in 1973.”
Six out of seven barrels of oil used by the Allies during World War II came from the United States, making US oil production the decisive energy advantage.
“the US was so dominant as a producer. Remember that six out of seven barrels of oil that were used by the Allies during World War II came from the United States.”
In 1973, oil was the one thing everybody bought (like gasoline stations today) and was omnipresent in consumer prices, making it politically sensitive and visible, unlike other commodities like steel.
“You and I don't go out and buy steel. But unless you have an electric car, you go to a gasoline station and fill it up. This was the same thing. This was the omnipresent product.”
In 1973, the US government finally gave an antitrust waiver to oil companies to try to have a unified front in negotiations with OPEC, but this got tangled up with geopolitics including Arab-Israeli wars and the use of the oil weapon.
“In 1973, the US government finally 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 Arab-Israeli wars and so forth. It wasn't just about oil. There were other things going on and you had the use of what was called the 'oil weapon'.”
Every previous energy transition has been energy addition (oil added to coal, not replacing it; coal is still the world's largest energy source and grew 3x since the 1960s despite renewable growth), making the current goal of rapid energy replacement unprecedented and challenging.
“Every other energy transition we've had has been energy addition. Oil discovered in 1859 overtakes coal. Coal is the world's number one energy source in the 1960s. Last year, the world used more coal than it's ever used, three times as much as the 1960s. Now the idea is, can you change everything literally in 25 years?”
Shale gas converted to liquefied natural gas (LNG) and exported to Europe was crucial in enabling Europe to resist Putin's energy coercion during the Ukraine war; without US shale gas, Putin could have used the energy weapon to shatter the coalition supporting Ukraine by cutting off gas supplies.
“It's been geopolitically very significant. That's been a learning experience for the Biden administration. It turns out that if it wasn't for shale gas made into what's called LNG, liquefied natural gas, shipped to Europe, Putin could well have shattered the coalition supporting Ukraine by using the energy weapon with, not oil, but gas.”
OPEC was setting prices, but when OPEC raised prices, market mechanisms responded by reducing demand and incentivizing new supply, which eventually undercut OPEC's own prices; this demonstrates that 'Supply and Demand' are the two most important characters in understanding energy markets, and they ultimately constrain any cartel's ability to maintain prices.
“OPEC was setting prices, but then the market responds. Demand goes down. In fact, that's exactly what OPEC did with its prices. It created incredible incentive to bring on new supplies and to be more efficient and undercut. It ended up undercutting its own price.”
Nantucket was historically important for energy transition as a source of lighting in the 19th century through whaling; this example shows that energy transitions have happened before and will continue, but change is inevitable rather than predetermined.
“we are in an energy transition, but it's going to be a longer one. Here we are, as you mentioned, in Nantucket, which was a key part of the energy transition because it was a source of lighting in the 19th century from whaling.”
The Inflation Reduction Act represents about a trillion dollars when fully implemented; it is nominally about climate and renewables but is also fundamentally about competing with China for leadership in renewable energy technology.
“We recently had this bill, the Inflation Reduction Act. It's huge, a trillion dollars the Treasury estimates when it's done. It's about climate and renewables, but it's also about competing with China.”
The oil industry attracts and rewards risk-taking personalities with willpower and perseverance; Colonel Drake, John D. Rockefeller, and George Mitchell all exemplified willpower that allowed them to persist when others said they were wasting time and money.
“Those are the ones who are successful. It takes a lot of willpower and perseverance.”
After World War II, Western oil companies initially made deals with exporting countries that were heavily favorable to the companies, but over decades exporting countries progressively extracted more concessions through renegotiation, demanding 50-50 splits and then increasing percentages until they gained 80% of profits in modern deals; this pattern reflects the 'obsolescing bargain' dynamic where host governments forget the original risk taken by companies and demand better terms.
“initially, the Western companies make these deals with exporting countries. First, it's just incredibly favorable towards the Western companies. But then the exporting countries are like, 'No, we got to do the 50/50 split.' Then they do the 50/50 split. Then just over a couple of decades, what happens is that they just keep asking for more and more concessions: 'We want 55%, 60%.'”
The Standard Oil breakup led to more room for entrepreneurship, experimentation, research, and innovation because decentralization removed the centralized control that had prevented alternative solutions; scientists developed new refining methods that people said couldn't be solved under the unified company structure.
“Because things weren't centralized, there was more room for entrepreneurship, experimentation, research, and for people to solve problems that other people said couldn't be solved.”
Sovereign wealth funds derived from oil revenues are now among the biggest investment vehicles in the world; funds from Norway, the Middle East, and other oil-producing countries now compete with traditional pension funds and venture capital for global investment opportunities.
“some of the biggest investment vehicles in the world are the offshoots of oil proceeds over the last decades. If you look at Norway, or if you look at the Middle East, they are offshoots of oil.”
Sovereign wealth fund managers must balance two objectives that are in tension: using the fund as a national development bank to invest domestically and create jobs, versus using it as a global diversification investment vehicle to maximize returns; different countries choose different balances between these approaches.
“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. It's quite another thing to use it as a basically global diversification investment vehicle. In Saudi Arabia, what's called the PIF, the Public Investment Fund, is doing both.”
Saudi Aramco is much better run than other nationalized oil companies because it retained highly trained people from the companies that were originally nationalized, maintaining their expertise and global workforce with PhDs from top universities like MIT and Stanford.
“There are others that are well run, but Aramco is a very well run company. As you described before, they rather smoothly did their transition and retained their people who are highly trained. If you go to Aramco, you meet people who have PhDs from MIT or Stanford or University of Texas. They have a very well trained global workforce and a very high standard.”
Electricity permitting in the US is extremely slow; it takes 29 years to open a new mine, and supply chain problems are severe (e.g., offshore wind cables cannot be obtained until 2029-2030 if ordered now); the workforce in electricity generation has aged out, requiring seven years to fully train a lineman.
“the issues that we have in our country, which is that you can't get things permitted. It takes so long. You have supply chain problems. You have a workforce that has aged out. It's said that to be a fully-trained lineman, you need seven years.”
German feed-in tariffs provided the key incentive that boosted the solar industry, which ironically enabled China to dominate solar manufacturing because of the scale of demand created by the tariffs.
“It's also interesting that what really gave the boost to the solar industry is German feed-in tariffs, which provided the incentive for the Chinese to dominate. Because they dominate the business.”
Concerns about energy security and the need to maintain economic growth create tension with energy transition goals; countries like India are balancing energy transition with energy security and economic growth maintenance, creating a different priority balance than in wealthy nations.
“Some of that thinking was developed during COVID, when demand went down and price collapsed. Part of it is people worrying about energy security. I was just reading last week the budget message from the finance minister in India. She talked about energy security and how they have to maintain economic growth. It's very important to do that and energy security as well as energy transition. So it's a different balance.”
Before the 1973 crisis, the oil market was characterized by integrated companies that controlled the entire value chain (production, transportation via tankers, refining, and retail through company-owned gas stations), and there was less market transparency and coordination; after the crisis, this integrated system was replaced by spot and futures markets where oil is traded independently from producers and retailers.
“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 US or Europe, to their gas stations. That system is gone.”
China's shift to renewable energy and electric vehicles is fundamentally a strategic move to reduce vulnerability from oil import dependency (75% of oil imports) and the chokepoint of the South China Sea; China learned from Japan's experience in WWII and recognizes that energy security requires shifting away from imported oil.
“For China, 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.”
Wind comprises about 10% of US electricity generation, while solar comprises about 3.5%, but there is tension between states and localities: states want to push renewable deployment while localities oppose solar or wind projects in their areas.
“Right now, wind is about 10% of US electricity. Solar is about 3.5%, but solar is going to grow. It certainly will grow very fast. I just heard this when I was at this utility commissioner's conference. There's real tension between states and localities. The states want to push it, but localities don't want solar or don't want wind.”
Major oil companies are investing in renewables, but there is a significant difference between European and American companies in their approach: European oil companies (Shell, BP, Equinor, Total) are pursuing both 'molecules' (hydrocarbons) and 'electrons' (renewables), while US companies say they do 'molecules, not electrons.'
“There's a difference among some companies. Some companies say yes. They look at offshore wind and say, 'We're in the offshore oil business, we can do offshore wind.' You see that in Europe where Equinor, which is the Norwegian company, or BP, or Shell, or Total, are big in offshore wind... The European companies say, 'We can do all of it.' The Americans say, 'We have no comparative advantage in electrons.'”
Narrative and story-telling are the best ways to communicate because they draw people in; modern writers compete with TikTok, YouTube, and podcasts, making engaging narrative essential.
“I also think that there are more and more things you're competing with if you're a writer. You're competing with TikTok, YouTube and everything... So you've got to draw people in and people love stories.”
Hitler could not produce synthetic fuel at sufficient scale during World War II; the process of making oil from coal was chemically possible but difficult to scale, and even the production that did exist was bombed by the Allies, creating a critical shortage that hindered German military operations.
“You would have needed to get to a scale that they could never get to. Synthetic fuel meant making oil out of coal using a chemical process. The other thing is that the Allies bombed the plants as well.”
After World War I, geologist Everette DeGolyer traveled to the Middle East on behalf of the US government and reported that the center of gravity of world oil was shifting to the Middle East, establishing concern that oil supplies should not fall into Soviet hands.
“During World War I a famous geologist named Everette DeGolyer did a trip to the Middle East on behalf of the U.S. government. He came back and said the center of gravity of world oil is shifting to the Middle East.”
The US became the world's largest oil importer in the late 1940s due to economic growth, highway systems, and suburban development driving oil demand up while domestic US production became unable to keep pace; the switch from exporter to importer happened gradually between 1946-1948 but with modest amounts initially.
“After World War II we had economic growth, highway systems, and suburbs. Oil demand is going way up, and we outran production. The US becomes an importer of oil in 1946, '47, '48. But it's modest amounts.”
Frackers transformed America's geopolitical position by achieving energy independence; the US was producing only 5 million barrels per day in 2008, but now produces more than 13.2 million barrels per day, making the US energy independent—a transformation many thought was impossible.
“The US was the world's largest importer of oil. We were only producing 5 million barrels a day of oil in 2008. Now we're more than 13.2 million barrels a day. The US is energy independent.”
The Shah of Iran's downfall in 1979 resulted from multiple factors: he suffered from cancer for two years causing him to lose control, he became arrogant and alienated people, he maintained a secret police apparatus, and his pell-mell rush of overspending created inflation and dislocated the economy; additionally, there was a significant religious reaction against modernization and changing gender roles.
“Look back at the events that led to the overthrow of the Shah of Iran. Things don't happen for one reason or another. He probably had cancer for two years and was losing it. He also had been so arrogant that he alienated people and he had his secret police and so forth. Then this pell-mell rush of overspending created inflation and dislocated the economy.”
World War I was a technological war in which, over the span of four to five years, military technology evolved from horses on battlefields to tanks, hundreds to thousands of trucks, cars, and planes; this rapid technological evolution established oil as a strategic commodity because oil-powered vehicles provided the mobility that proved decisive.
“World War I is especially interesting as a technological war because in the span of four or five years, you go from battlefields with horses to literally the tank being invented during this time. You go from hundreds to thousands of trucks, cars, and planes.”
The supply of oil during the 1973 oil crisis declined by only about 15%, yet the crisis had an enormous effect on the global economy; this happened because the supply reduction was completely unprecedented and unexpected, creating panic, and because governments imposed price controls and allocation controls that prevented the market from adapting efficiently.
“the supply of oil didn't actually go down that much. Global supply declined by 15% or something. Why did it have such a huge effect?”
Wind and solar provide diversification for energy systems, which is essential for energy security; Churchill's principle that 'safety lies in variety and variety alone, diversification' applies to modern energy transitions as well.
“It's a question of scale. What I carried away, the basic premise of energy security goes back to Churchill. He said that safety lies in variety and variety alone, diversification. Wind and solar give you diversification.”
World War II was not fundamentally an oil war, but there was an oil war within World War II that was crucial to the outcome; multiple theaters of the war centered on oil access: Hitler invaded Russia partly to reach the Baku oil fields, Japan's attack on Pearl Harbor targeted US naval power to access Southeast Asian oil, Rommel ran out of oil in North Africa, Patton's offensive in 1944 was held back by oil shortages, and the US targeted Japanese oil supply lines to drain Japan's war machine.
“World War II was not an oil war, but there was an oil war within World War II.”
A Yale professor and consultant conducted an experiment by converting rock oil into a lighting fuel; this research was motivated by a financial need and led to the development of kerosene as a viable lighting source, replacing whale oil just as the whaling industry faced depletion.
“You were going to run out of whales. I love that this professor at Yale, kind of a consultant, did this experiment. He needed some extra money and he did some studies that showed that actually this stuff called rock oil, you could turn it into a lighting fuel fluid.”
Today the US Navy is pushing back against the Houthis in Yemen who are attacking oil tankers, continuing the pattern that maintaining access to oil supplies remains crucial to government interests.
“The question of access and of maintaining the supplies, then and now, remains crucial. You have the US Navy today trying to push back on the Houthis in Yemen, who are attacking oil tankers.”
The US economy went from a very strong growth trajectory to the deepest recession since the Great Depression following the 1973 oil crisis, and it took a decade to dig out of that economic hole.
“The US went from being on a very strong growth trajectory to what at that time was the deepest recession since the Great Depression. Of course, we've had deeper recessions since then. It took a decade to dig out of that hole.”
Data centers currently use about 4% of US electricity, but projections suggest this could grow to 10% by 2030; some estimates project data centers will need 1 gigawatt to 1 specific campus or location, meaning they consume the entire output of a large nuclear power plant and take that power off the grid.
“It's potentially even worse than the 10% number implies, because it's not widely distributed like households would be. In many cases, they have to be one gigawatt to one specific campus or location.”
Solar is different from wind in that supply chain constraints are less severe, but solar is heavily dominated by China because of their manufacturing scale and efficiency.
“Solar is different. But of course, solar is so dominated by China.”
Russia remains heavily dependent on oil and gas revenues, which distorts the Russian economy because it reduces the incentive to diversify and develop other industries, making Russia vulnerable to commodity price shocks.
“Russia is still, at the end of the day, heavily dependent upon oil and gas. It distorts their economy.”
The United Arab Emirates and Abu Dhabi performed better than other oil-producing countries at using oil revenues sustainably; they built a sovereign wealth fund worth roughly a trillion dollars, diversified their economy so that more than half their GDP is no longer oil-dependent, and are attempting to transition away from oil dependence while maintaining wealth.
“The country that has done the best was not a big player then, the United Arab Emirates and Abu Dhabi. They built a sovereign wealth fund that's probably worth a trillion dollars. They diversified their economy. A couple of years ago when I looked at it, more than half their GDP was no longer oil.”
Saudi Arabia today is attempting to diversify away from oil dependence because they recognize that oil cannot sustain their economy forever and that future technology and markets are unpredictable; this diversification effort is necessary because the country cannot depend on oil revenue indefinitely.
“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 and where the markets are going to be.”
To avoid Dutch disease, countries should 'sterilize' resource wealth by placing it into sovereign wealth funds that invest the money overseas, and should invest in education and health to convert financial capital into human capital rather than allowing resource wealth to create inflation and uncompetitiveness.
“You want to, as they say, sterilize some of the money that comes in. You put it into a sovereign wealth fund, invest it overseas. Then you want to put money into education and health and those basic human needs. You want to turn financial capital into human capital.”
Approximately 12 million people in the US have jobs connected to the oil and gas industry, representing a significant workforce that would be affected by energy transition policies.
“there are about 12 million people in the US whose jobs are connected to the oil and gas industry.”
Saudi Arabia became very important globally during the 1973 crisis and the subsequent petrodollar era because of the huge flows of money generated by high oil prices; this money gave Saudi Arabia political and economic influence in the global system, and oil wealth attracted influential figures (e.g., Spiro Agnew) to the region seeking business opportunities.
“Saudi Arabia had been a country that people didn't think much about in the US. Suddenly Saudi Arabia became really important. You had this huge flow of money that went into these economies, what were called petrodollars. That made them a whole other source of influence.”
Prime Minister Modi of India made the crucial decision to move India away from the Permit Raj (government-controlled economy) toward market-based forces; Modi's simple words 'We need new thinking' represented a fundamental shift that has made India a much larger force in the world economy.
“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. It was a very heated discussion and then I just remember his remarks: 'We need new thinking.' Those simple words have pointed to how India has become so much of a bigger force in the world economy today”
Energy transition will not happen because of price; it will happen because of policy and technology; simple notions of how energy transitions will work are incorrect because the current energy transition is fundamentally different from previous ones.
“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 that's what's driving it. I have the view that people have had too simple notions of how the energy transition will work.”
Rockefeller was hated in his time because he embodied the monopolist, used loaded dice according to journalist Ida Tarbell, and was the obvious target for President Theodore Roosevelt's trust-busting agenda; additionally, Rockefeller's kerosene was an omnipresent product that everyone bought (like gasoline today), making the monopoly politically intolerable.
“He became the very epitome of the monopolist. A famous woman journalist, Ida Tarbell, wrote a book about the Standard Oil trust. She said it was a great company, but it always played with loaded dice.”
'Dutch disease' is an economic condition where a country discovers natural resources and receives large inflows of wealth, which creates inflation and makes other businesses uncompetitive due to currency appreciation; the phenomenon was named after the Netherlands when they became a major natural gas producer.
“So we need to explain the Dutch disease, which means that you create an inflationary economy and make businesses uncompetitive. That's the heart of the Dutch disease. Of course, that concept was invented for the Dutch. It happened when the Netherlands became a big producer of natural gas.”
Total factor productivity growth in the US was about 2% before 1973 but dropped to less than 1% after the oil crisis; while Yergin is not an expert on the causes, former Fed Chair Ben Bernanke and others have studied why the slowdown occurred.
“If you look at the sort– the rates of economic growth or rates of total factor productivity growth before that date, it's pretty high for a long time. It's 2% total factor productivity growth before the 1970s. Afterwards it's like less than 1 percent in the US.”
The energy business is surprisingly small as a percentage of GDP (oil is about 3% of GDP) despite being essential to everything; oil's share of the stock market has also declined over time, even though it remains a strategic commodity.
“It's surprisingly small. It's a fraction of GDP. Oil is 3% of GDP. Obviously the entire world depends on it, but you wouldn't see that in the GDP numbers.”
The German military position in World War I was based on the railroad, which was inflexible, while the Allies had trucks and mobility, giving the Allies the advantage that the Germans themselves later acknowledged they would have won the war if they had possessed.
“The German military position was based upon the railroad and inflexible. Suddenly you had trucks, motorcycles, tanks, airplanes...What the Allies had was mobility that the Germans didn't have. Even the Germans said, 'We would have won the war if it wasn't for the tank,' or the trucks or something like that, right? Exactly. What the Allies had was mobility that the Germans didn't have.”
The British government owned a big share of British Petroleum (BP) until the late 1980s and did back up oil companies, but the nationalization of what was then called Anglo-Persian, Anglo-Iranian oil (which became BP) showed that even government support had limits in preventing resource nationalism.
“Remember the British owned a big share of British Petroleum, now BP, until the late 1980s. The British government was in there, but then you had the nationalization of what was then called Anglo-Persian, Anglo-Iranian oil, which became BP. I think it was inevitable. The governments did try and support, but there were limits to what they could do.”
As an economy becomes bigger, it doesn't grow at the same rate as it did when smaller because growth is off a much larger base, providing a partial explanation for why US growth rates haven't returned to pre-1973 levels.
“Also with the US, as your economy becomes bigger you don't grow at the same rate. You're growing off a much larger base.”
Annual solar deployment spending is approximately $500 billion per year; comparing this to historical energy transitions, it represents an unprecedented scale, potentially rivaling the scale of electrification.
“Speaking of solar deployment, I think solar deployment is on an annualized $500 billion budget. That's the yearly amount that we're investing in deploying it.”
The cost of energy does not appear to be a general constraint on the economy currently because Big Tech emerged after 1973 and developed rapidly despite high energy costs in California; energy cost constrains when you have price spikes or disruptions, but in normal times it is not a major constraint.
“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. Big Tech wasn't born in 1973.”
Bill Gates stated that data center specifications have changed dramatically; they used to discuss data centers in terms of CPUs (central processing units), but now speak of them as 300 megawatt data centers, reflecting the scale of modern AI compute infrastructure.
“I did a discussion with Bill Gates at our CERAWeek conference in March. He said we used to talk about data centers as 20,000 CPUs. Now we talk about them as 300 megawatt data centers.”
Whaling for lighting became obsolete not because whale oil was immoral, but because kerosene was cheaper, demonstrating that energy transitions are driven by economic advantage, not moral concern.
“You were going to run out of whales... it was a lighting fuel fluid... We wouldn't be where we are. We wouldn't have the world.”
Japanese kamikaze pilots were driven to conduct suicide attacks partly to save fuel so they wouldn't need to fly back to their aircraft carrier, indicating how severe Japan's fuel shortage was and how it shaped even the most extreme military tactics.
“People have heard of kamikaze pilots who would fly their planes into aircraft carriers. One big reason they were doing that was to save fuel so they wouldn't have to fly back.”
If you look at Venezuela, they nationalized their oil operations and had very well-trained people who could run refineries, drill, and find oil, so they carried that DNA in their operations for quite a number of years until complete nationalization and Chávez came to power.
“If you look at Venezuela, they nationalized their oil operations. But by that point, they had people who were very well trained at running refineries, at drilling, and at finding oil. They still carried some of that DNA with them in their operations for quite a number of years, until the complete nationalization and Chávez came to power.”
Despite energy independence, the US is very far from a scenario where allies like Japan are also energy independent, with Japan importing significant amounts of oil and depending on LNG exports from the US as part of their energy security.
“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? 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.”
Some argue innovation will solve electricity demand by making chips less electricity dependent or operating data centers differently to reduce demand growth, but these innovations haven't happened yet, creating uncertainty about whether demand or supply innovations will dominate.
“Some will say the answer to that is innovation. Chips will become less electricity dependent or data centers will operate differently. So the demand will not grow as much. There are those who say that will happen, but it hasn't happened yet. Others are saying, 'How are we going to meet that demand?' AI is going to demand a lot more electricity than we had thought about a year or a year and a half ago.”
New industries tend to develop and achieve massive scale very quickly—oil booms appeared within a decade of Drake's 1859 discovery, the automobile industry in the 1920s went from nothing to chauffeurs and mansions on Long Island in 15 years, and the movie industry saw vaudeville five-cent shows become Long Island mansions in 15 years—a pattern also seen with the internet in the early 21st century.
“In 1859, Colonel Drake hits the first oil well in Pennsylvania. In less than a decade, you have many oil boom towns and oil busts and Standard Oil is formed. Millions of barrels of crude are being pumped out every year.”
Data centers must position themselves where they have access to reliable 24-hour electricity, creating energy security concerns about electricity availability alongside traditional oil and gas security, representing a potential constraint on economic activity.
“Data centers are looking at where they can position themselves so that we have access to the electricity that they need: reliable 24-hour electricity. Now there's energy security in terms of oil and gas. Actually it's also energy security in terms of electricity. There's your potential constraint on economic activity.”
The US faces multiple new sources of electricity demand: electric cars, energy transition investments, and bringing back chip manufacturers and smart manufacturing to the US, all happening simultaneously, creating unprecedented electricity demand growth after a decade of flatness.
“The sense is that you have electric cars and energy transition demand. Then you're bringing back chip manufacturers and smart manufacturing to the US. That's electricity demand. Then you have AI and data centers. Suddenly this industry that had been very flat is now looking at growth. How you are going to meet the growth is very much on the agenda right now.”
Narrative-based historical analysis differs fundamentally from purely statistical analysis by capturing contingency, human agency, the decisions that led to outcomes, mistakes, and what people got wrong; narrative reveals the texture of history showing that things were not inevitable.
“But what you may miss is the contingency: the human agency, the decisions that went onto things, the right decisions that were made, the mistakes and the things that you missed or were wrong about. It's the texture.”
While individual companies struggle with renegotiated resource contracts, there is an inevitability to resource nationalism that also has to do with the consolidation of nation states and the end of colonialism, with countries becoming independent and asserting that they own their own resources.
“It was also the end of colonialism. Countries were becoming independent. Today, if a company makes a deal with a country to go develop oil, the country gets 80% of the profit.”
Understanding why historical events happened requires narrative explanation. The 1973 Arab embargo provides an example: understanding it requires knowing about Arab nationalism forcing Saudi support, why Egypt launched an attack, and the connection to ceasefire positions.
“It's hard to understand many of the things if you don't have an understanding of other things. Arab nationalism forced the Saudis to support the embargo. Why did Egypt launch an attack? Because they wanted a ceasefire to be in a different place, but they actually wanted to end the war… There's so many different things like that. That's right. You don't understand why these things happened. You just look at the numbers, but why did it happen? Part of it is, through narrative explaining why it happened.”
The relationship between oil wealth and political instability in the Middle East is complex; while oil exists and has enabled revenue flows, the instability also reflects deeper factors including religion, the Arab-Israeli conflict, and Iran's neo-colonial regional power dynamics with approximately 250,000 proxy troops in other countries.
“That's a very good question. I don't have a good answer to that. There's oil, but there's also religion. There's also the Arab-Israeli conflict. There's Iran, which is really in some ways a neo-colonial power in the Middle East.”
Economic development is ultimately contingent on the laws of physics and the availability of energy sources; if oil and coal had not formed through fossilization, or if alternative energy sources like solar power had not eventually developed, it would be hard to imagine how society would have progressed from water wheels to modern civilization.
“just how much economic development is ultimately contingent on the laws of physics. Suppose that fossilization happened in a different way and then oil didn't form. Let's say coal didn't form either. Then it's hard to imagine how society goes from like water wheels to solar power.”
Rockefeller's management approach was based on rigorous discipline and attention to detail at scale—tracking metrics to two decimal points without computers or calculators—combined with boldness in seeing where to go next and implementing it.
“It was the discipline of the business. He created a very disciplined business. They went out to two decimal points. That was before computers or calculators. It was rigorous attention to detail but at scale. It was also boldness and being able to see where you needed to go next and then implement it.”
Rockefeller's public relations strategy of claiming 'It's nobody's business' was ineffective and reflected arrogance from running a global company from a single office on 26 Broadway; modern PR advisors would have recommended a different approach, though his stance also reflected the power he felt from creating and running such a large enterprise.
“'Why does anybody need to know about our private business?' was his notion. 'We're a private business. It's nobody's business.' Today, you would have a PR advisor tell him that's not really the right stance to take, but at that time… It probably also came from the arrogance of having created this huge company, running a global company from an office on 26 Broadway.”
During the 1973 oil crisis, the front pages of newspapers were dominated by the Watergate scandal rather than coverage of the oil supply crisis; this inattention to energy security is a risk because energy security issues tend to fall off the agenda until they hit people forcefully.
“When we finally get to the crisis, the famous oil crisis of 1973—which probably opened the modern age of energy—what's going on at the same time? There's this political crisis in the United States called Watergate. The front page of the newspaper is not about tight oil supplies. It's all about what Richard Nixon did in terms of subverting the election and the political process. There was just inattention and that's one of the risks.”
Oil demand elasticity has changed over time; in the past, oil demand was very inelastic (price increases would not reduce demand significantly), but new technologies create more flexibility: people can work remotely through video conferencing rather than traveling, and fracking has increased supply elasticity.
“In the past, you're not going to stop going to work because oil is 10% more expensive, right? With the Arab oil embargo, prices went up like 300% even though supply only went down 15%. But now, if oil goes up in price, you can Zoom or video conference or something. With fracking also you can increase supply if you want to. Because of these new flexibilities we have, is there going to be a lot more elasticity in demand?”
The most important factors in energy futures are visible technologies (solar, wind, fracking, AI) and unexpected technologies that may emerge; the future will be shaped by combinations of anticipated and unanticipated technological change.
“The most important thing are the technologies that you can see coming or the ones that come from left field like fracking or grasping what AI is going to mean for how our economies work.”
Yergin used the advance from The Prize to capitalize a company he started, creating financial pressure to finish the book; he wrote at night and on weekends while running a business, immersing himself in subject matter and building the narrative intuitively rather than with a master plan.
“I used the advance for The Prize to actually capitalize the company we started, which created an incentive to finish The Prize... Writing at night, writing at weekends, vacations, filling up our car with books, and just immersing in it. I did not have a master plan.”
Rockefeller respected his competitors—particularly the hardy ones who had been willing to compete against him—and recruited them into Standard Oil; when they saw his position was unbeatable, they switched sides and prospered as a result.
“He respected his competitors, particularly the hardy ones. Those were the players who said, 'Okay, rather than fight you, I'm going to get on board this ship.' He brought them in and they all prospered as a result.”
US energy exports have become part of the arsenal of NATO, representing a new understanding that energy security is part of the defense relationship, different from historical patterns where energy was merely a commodity.
“I never thought of it quite that way, but if you think about what the Japanese are saying, that's really what their message is. I did an event with the Japanese prime minister in the springtime. That came through very clearly. For them, US exports are part of the security relationship. US LNG is now part of the arsenal of NATO. It's really different.”
Oil (as a commodity with controllable flows) differs from renewable energy like wind and solar (capital stocks) in terms of geopolitical leverage; oil's ability to be turned on and off creates leverage for producers, while renewables (being capital stock) do not provide the same leverage mechanism.
“With oil, you have a commodity which is a flow. You can cut it off and you can turn it back on again. 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's just a capital stock.”
Oil in its first 50 years of use was employed only for lighting; similarly, current AI models can produce a million tokens for 15 cents, but this represents early-stage use case discovery; the question is what industrial-scale use case for AI would be equivalent to the automobile market that transformed oil from a lighting commodity into the fuel for transportation.
“kerosene is 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. You can literally get a million tokens, like many books length of content, out of these models for 15 cents. This is one question people are asking. Let's say you did a hundred billion dollars worth of tokens, what does that look like? What does an industrial scale use of intelligence look like?”
AI and compute infrastructure have the potential to absorb arbitrary amounts of energy as they improve; there is no existing sector where dumping more energy into it creates such elastic demand, making AI/compute potentially unique in its energy elasticity.
“maybe the main thing with AI and compute is that you have this sort of thing where you can just dump arbitrary amounts of energy into this and it gets better. Currently there's nothing where if you just keep dumping more energy into it, there's a huge elasticity of demand.”
Yergin was uncertain whether The Prize would become a definitive history while writing it; looking out from an apartment overlooking the Charles River at 2 a.m., he wondered whether it would become 'a veil of tears' (a failure), but he was driven by a sense that a crisis was coming that would validate the project.
“We had this apartment overlooking the Charles River in Cambridge. I'd look out there at 2 a.m. in the morning and think, 'What's going to happen?' I think those around me despaired a little bit. This could end up a veil of tears. But it turned out... I did have a sense that I needed to get it done. That something, that some crisis was going to come.”
A political leader in Central Asia stated that 'AI is going to be the true source of power in the future,' reflecting how some leaders are already thinking about AI's geopolitical implications.
“I remember a political leader in Central Asia saying, 'AI is going to be the true source of power in the future.'”
A wind turbine blade fell off a turbine in Nantucket and washed up on the beach, creating significant consternation and reopening discussion about offshore wind projects.
“They just had a thing where one of the blades of one of the big wind turbines fell off and washed up on the beach. That has now created some really huge consternation and suddenly reopened the discussion.”
Ukraine today is similar to the Spanish Civil War (1936-1939) which was a 'dress rehearsal' for World War II in that it shows how advanced technologies and new warfare techniques are being developed and tested in a real conflict, including drones, cyber warfare, information technology, tank battles, and positional/trench warfare, all in one conflict.
“On the one hand it's advanced technologies, information technologies, cyber warfare, and drones in a way that hadn't been conceived before... But it's also a World War II battle in that there's been tank battles. It's a World War I one in that it's called positional warfare, trench warfare. So you have a whole century of warfare there, but it is certainly the beta test for new technologies.”
Yergin's writing methodology is visual and artistic rather than structural; he sketches out ideas, fills in details, and iteratively polishes sentences; he reads the entire manuscript aloud to test whether every sentence 'has resilience' and 'sings.'
“My mother was a painter and I would watch her sketch. That's the image I have is that I sketch it out and then I fill it out and work on it. Like a lot of people, I love to edit and polish... With The Prize, one of the things is that I read the whole book aloud to myself to test every sentence. Does every sentence have resilience? Does it sing?”
Yergin started writing as a child using his father's typewriter (his father was a newspaper reporter), was student body president and editor of the literary magazine in high school, and started a magazine called The New Journal doing narrative journalism at Yale, where he learned to tell stories.
“I started writing when I was a child. My father had an old typewriter. He'd been a newspaper reporter and I would hunt and peck and just write stories. In high school, I was student body president but I was also editor of the literary magazine. When I was an undergraduate at Yale, I started a magazine called The New Journal which was narrative journalism. I learned a lot of my writing doing that. I learned a lot of my writing writing magazine articles, how to tell a story.”
Nuclear energy was promised to be 'too cheap to meter' in the 1950s, which did not happen; fusion technology is now perhaps 10 years away (from the current interview date), though it has been promised to be 'only 50 years away' for decades; fusion represents potential but faces uncertain timelines.
“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. Now there's fusion, which seemed to be 50 years away. It's now maybe 10 years away.”
Oil was discovered in Kuwait and Saudi Arabia in 1938 but the development was bottled up until after World War II, when these fields became crucial for meeting global oil demand.
“The only place producing oil in the Middle East before then was Persia, Iran. Oil was discovered in 1938 in Kuwait and Saudi Arabia and then got bottled up until after World War II.”
The Prize took seven years to write instead of the initially planned two years because the story of oil became so compelling and woven into the history of the 20th century that the author could not adequately cover oil without covering the entire century's narrative.
“I agreed to do that book and I said I'd do it in two years. It took me seven. The story just became so compelling and it became woven in with the history of the 20th century.”
The 3x rule: whatever difficulty or time you expect a major historical project to require, expect it to actually require approximately three times as much effort.
“The one thing I've learned from doing these books is the 3x rule. However hard you think it's going to be, it's going to be at least three times as hard to do.”
History worth writing requires compelling stories about significant topics; possible subjects include the entertainment and movie industry or a comprehensive modern history of the internet, both of which have dramatic characters and transformative importance.
“My father had worked at Warner Brothers for a time. I was always interested in the movie and entertainment business and how that developed. A big epic story of that... One of the things that is fun when you're writing this is when you have these oversized personalities.”