Daniel Yergin explained the state of the world in his 1990 Pulitzer Prize–winning book, The Prize: The Epic Quest for Oil, Money and Power. He did it again in 1998 with Commanding Heights: The Battle for the World Economy1 and in 2011 with The Quest: Energy, Security, and the Remaking of the Modern World. His most recent book, The New Map: Energy, Climate, and the Clash of Nations, detailed how the world has shifted politically and economically, with dramatic and potentially perilous implications not only for nations but also for business. In an interview with McKinsey partner and global director of geopolitical risk Ziad Haider, Yergin—who is also vice chairman of S&P Global—explains why companies today face circumstances similar to those of the Cold War, in which they can be “caught up in turmoil that has nothing to do with their business plans or their strategies but the rivalries of countries.”
This conversation is part of a series of interviews with leading geopolitical thinkers and practitioners, held during our inaugural summit on geopolitics on December 2, 2024. It has been edited for clarity.
The impact of Western energy independence
Ziad Haider: The Prize was a milestone book that really helped clarify the contours of the energy market and its geopolitical dimensions. In your recent terrific book, one of the big pivots you point to is the fact that today the Western hemisphere produces more oil than the Middle East. What is the geopolitical impact of this shift?
Daniel Yergin: It’s changed the geopolitical balance in the oil market. First, we have turmoil in the Middle East, and in the past, we would’ve seen prices shooting up. It’s not happening now. I think this has been a great rebalancing and, in the sense of security, it’s given the United States a degree of influence it didn’t have before. It’s particularly significant in terms of the coalition supporting Ukraine. Vladimir Putin thought he could use the energy weapon—cut off gas to Europe and the coalition would shatter. It didn’t happen, and it’s because of liquefied natural gas (LNG)—and a significant part of that LNG comes from the world’s largest exporter of LNG, which is the United States.
Ziad Haider: What do you think is going to be the role of energy as a lever in terms of the outcome of this conflict?
Daniel Yergin: Oh, the continuing ability of the United States and other countries to provide LNG. It’s astonishing. This war in Ukraine at this point is three-quarters of the length of the first World War. It’s just gone on and on, and energy has been a very important component of it. I think the Europeans are worried a lot about tariffs and will try to increase their imports of LNG from the United States to show that they’re trying to right the trade balance. They look to LNG exports to China to be something to address the trade imbalance.
How Europe and the Middle East are changing
Ziad Haider: When you think about European energy security, how do you see that evolving?
Daniel Yergin: Europe has big economic problems. The gap between Europe and the United States has grown. Deindustrialization is a continuing issue, and it almost seems day by day there are layoffs and turmoil. And I think that in Europe, particularly during COVID-19, it looked as if you could just pursue climate policies and there would be no cost. But if you’re putting policies in place that are more expensive for companies, there’s a price for that in cost and competitiveness. Europe really is in a tough place in terms of trying to reconcile these competing priorities, and it’s a very difficult issue for people who lead companies in Europe. That’s one reason the Inflation Reduction Act has acted as a magnet for European capital: because European companies are feeling that they need to shift their investment outside Europe to stay competitive.
Ziad Haider: Let’s talk about the Middle East. The US has reduced its dependence on the Middle East for oil and gas imports, and we’re seeing new relationships form between the Middle East, for example, and countries in Asia that still are energy-dependent. How do you see trade evolving, and what does that mean for business?
Daniel Yergin: The main market is Asia—China and increasingly India. When I’m talking to those countries, you sort of see that they look to Europe but particularly the United States for one dimension for security, but for their economic markets they look in the other direction, particularly their markets for oil and gas. So you see changes. You see China brokering this relaxation of tensions between Saudi Arabia and Iran. You wouldn’t have seen that a few years ago.
Ziad Haider: What energy comes from the other direction? We see China as a leader, for example, in certain capabilities related to electric vehicles (EVs) and solar. Will we see more of that trade coming to the Middle East?
Daniel Yergin: I think it’s EVs, solar panels, wind turbines, and batteries. And Europe is deeply concerned about Chinese EVs coming into the market, and we see the European and the US auto companies struggling with EVs, except for Tesla. It gets to a general question of supply chains. A CEO said to me that until 2019, supply chains were not strategic issues—they were managed by the supply chain managers. Now they’re very strategic issues, and very complicated and very difficult for companies to deal with.
Implications of the energy transition
Ziad Haider: With China, I love your frame of holding in one’s mind energy security and the energy transition and the interplay between those two. When we look at China today from an energy security point of view, it’s still importing 75 percent of its oil. But from an energy transition point of view, it’s a leader in terms of EVs, solar, and batteries. Then, of course, we have the context of this escalating strategic competition between the US and China. How do you see this playing out in terms of supply chains?
Daniel Yergin: If you put tariffs on Chinese steel, you affect the economics of US oil and gas companies importing that lower cost of steel. The phrase I came up with in The New Map is we had this thing called the WTO consensus, which was basically 30 years of globalization. We all benefited from it. China went from being a very poor country to the second-largest economy in the world. Are we now in an era of great power competition, great power rivalry? I sometimes hear the phrase “strategic adversaries.” This means that the global business environment CEOs have grown up in—that playbook doesn’t exist. It’s being rewritten right now. It doesn’t mean globalization goes away, but it means it’s much more complicated and with more risk in it, both for companies and globally.
Ziad Haider: When you think about advising companies on the supply chain shifts that are happening around the energy transition, what are the kind of risks you tell them to keep an eye on, and what’s the opportunity for value creation for them?
Daniel Yergin: Right now, it’s more risk because the alternatives are more expensive in terms of what you do. The energy transition is now colliding with geopolitical rivalry and tension. For companies, it means jarring adjustments to changing situations and higher costs because, of course, the reason these supply chains grew the way they did is because they were so economic, and that was a stimulus for growth. What we have today is substitution of energy versus addition—trying to substitute about $110 trillion or $115 trillion of the world economy—and we’ve run into problems with scale. I think we see people struggling with [the reality of the shift]. The direction is clear, but how you’re going to get there is not going to be a smooth path.
Ziad Haider: There is reason for caution, that we cannot do this as quickly as we may have done other energy transitions. But there are also reasons for some optimism if you look at the way the price of solar, for example, has come down. There’s a finite time period in which we can bend the curve on all of this. How do you feel about how we’re tracking?
Daniel Yergin: Well, wind and solar were at their maximum levels in 2023, but so was oil and coal. Gas was not because Europe’s gas consumption is down about 25 percent from where it was before the invasion of Ukraine. I think the reality is, this is going to unfold over a longer period, and there are more trade-offs than were evident earlier on.
Adapting to a more divided, riskier world
Ziad Haider: One last question. When The Prize came out in 1990, it was right at the end of the Cold War, and it was an era of hyperglobalization. The New Map came out in 2020, which was a different moment—the beginning of a connected yet contested world. What is the third book going to be, and what will the world look like when it comes out?
Daniel Yergin: There’s another book in there called Commanding Heights: The Battle for the World Economy, which is about the rise of globalization. As you say, these themes do come together, and I think the new subject is a world that’s divided with more risk. In many ways, one of the things we have to do is be careful that we don’t fall into a pre-World War I situation, where an accident can trigger something more serious. But we’ve seen this new coalition of Russia, China, Iran, and North Korea. I think we’re in a more dangerous world that really calls for statesmanship to navigate what is a more perilous time ahead. And it’s a more perilous time for companies, which can be caught up in turmoil that has nothing to do with their business plans or their strategies but the rivalries of countries. That’s an era we thought was behind us when the Cold War ended.
