Table of Contents
Title Page
Copyright Page
Introduction
PART ONE - The New World of Oil
Chapter 1 - RUSSIA RETURNS
Chapter 2 - THE CASPIAN DERBY
Chapter 3 - ACROSS THE CASPIAN
Chapter 4 - “SUPERMAJORS”
Chapter 5 - THE PETRO-STATE
Chapter 6 - AGGREGATE DISRUPTION
Chapter 7 - WAR IN IRAQ
Chapter 8 - THE DEMAND SHOCK
Chapter 9 - CHINA’S RISE
Chapter 10 - CHINA IN THE FAST LANE
PART TWO - Securing the Supply
Chapter 11 - IS THE WORLD RUNNING OUT OF OIL?
Chapter 12 - UNCONVENTIONAL
Chapter 13 - THE SECURITY OF ENERGY
Chapter 14 - SHIFTING SANDS IN THE PERSIAN GULF
Chapter 15 - GAS ON WATER
Chapter 16 - THE NATURAL GAS REVOLUTION
PART THREE - The Electric Age
Chapter 17 - ALTERNATING CURRENTS
Chapter 18 - THE NUCLEAR CYCLE
Chapter 19 - BREAKING THE BARGAIN
Chapter 20 - FUEL CHOICE
PART FOUR - Climate and Carbon
Chapter 21 - GLACIAL CHANGE
Chapter 22 - THE AGE OF DISCOVERY
Chapter 23 - THE ROAD TO RIO
Chapter 24 - MAKING A MARKET
Chapter 25 - ON THE GLOBAL AGENDA
Chapter 26 - IN SEARCH OF CONSENSUS
PART FIVE - New Energies
Chapter 27 - REBIRTH OF RENEWABLES
Chapter 28 - SCIENCE EXPERIMENT
Chapter 29 - ALCHEMY OF SHINING LIGHT
Chapter 30 - MYSTERY OF WIND
Chapter 31 - THE FIFTH FUEL—EFFICIENCY
Chapter 32 - CLOSING THE CONSERVATION GAP
PART SIX - Road to the Future
Chapter 33 - CARBOHYDRATE MAN
Chapter 34 - INTERNAL FIRE
Chapter 35 - THE GREAT ELECTRIC CAR EXPERIMENT
CONCLUSION: “A GREAT REVOLUTION”
Acknowledgements
CREDITS
NOTES
BIBLIOGRAPHY
INDEX
ALSO BY DANIEL YERGIN
ALSO BY DANIEL YERGIN
The Prize
Shattered Peace
Coauthored by Daniel Yergin
The Commanding Heights
Russia 2010
Global Insecurity
Energy Future
THE PENGUIN PRESS
Published by the Penguin Group
Penguin Group (USA) Inc., 375 Hudson Street, New York, New York 10014, U.S.A. • Penguin Group (Canada), 90 Eglinton Avenue East, Suite 700, Toronto, Ontario, Canada M4P 2Y3 (a division of Pearson Penguin Canada Inc.) • Penguin Books Ltd, 80 Strand, London WC2R 0RL, England • Penguin Ireland, 25 St. Stephen’s Green, Dublin 2, Ireland (a division of Penguin Books Ltd) • Penguin Books Australia Ltd, 250 Camberwell Road, Camberwell, Victoria 3124, Australia (a division of Pearson Australia Group Pty Ltd) • Penguin Books India Pvt Ltd, 11 Community Centre, Panchsheel Park, New Delhi–110 017, India • Penguin Group (NZ), 67 Apollo Drive, Rosedale, Auckland 0632, New Zealand (a division of Pearson New Zealand Ltd) • Penguin Books (South Africa) (Pty) Ltd, 24 Sturdee Avenue, Rosebank, Johannesburg 2196, South Africa
Penguin Books Ltd, Registered Offices:
80 Strand, London WC2R 0RL, England
First published in 2011 by The Penguin Press,
a member of Penguin Group (USA) Inc.
Copyright © Daniel Yergin, 2011
All rights reserved
Photograph credits appear on pages 722–23.
LIBRARY OF CONGRESS CATALOGING IN PUBLICATION DATA
Yergin, Daniel.
The quest :energy, security, and the remaking of the modern world / by Daniel Yergin. p. cm.
Includes bibliographical references and index.
ISBN : 978-1-101-56370-0
1. Power resources—Political aspects. 2. Money—Political aspects 3. Globalization. I. Title.
HD9502.A2Y47 2011
333.79—dc22
2011013100
MAPS BY VIRGINIA MASON
GRAPHICS BY SEAN MCNAUGHTON
Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book.
The scanning, uploading, and distribution of this book via the Internet or via any other means without the permission of the publisher is illegal and punishable by law. Please purchase only authorized electronic editions and do not participate in or encourage electronic piracy of copyrightable materials. Your support of the author’s rights is appreciated.
While the author has made every effort to provide accurate telephone numbers and Internet addresses at the time of publication, neither the publisher nor the author assumes any responsibility for errors, or for changes that occur after publication. Further, publisher does not have any control over and does not assume any responsibility for author or third-party Web sites or their content.
http://us.penguingroup.com
INTRODUCTION
They happened at the same time, halfway around the globe from each Bother. They both shook the world.
On March 11, 2011, at 2:46 in the afternoon Japan time, 17 miles below the seabed, the pressure between two vast tectonic plates created a massive violent upward force that set off one of the most powerful earthquakes ever recorded. In addition to widespread damage to buildings and infrastructure in the region north of Tokyo, the quake also knocked out the power supply, including that to the Fukushima Daiichi nuclear complex. Fifty-five minutes later, a huge tsunami unleashed by the quake swept over the coast, drowning thousands and thousands of people. At the Fukushima Daiichi complex, located at the very edge of the ocean, the massive tsunami surged above the seawall and flooded the power station, including its backup diesel generator, depriving the hot nuclear reactors of the cooling water required to keep them under control. In the days that followed, explosions damaged the plants, radiation was released, and severe meltdowns of nuclear rods occurred.
The result was the worst nuclear accident since the explosion at the Chernobyl nuclear plant in Soviet Ukraine a quarter century earlier. The Fukushima accident, compounded by damage to other electric generating plants in the area, led to power shortages, forcing rolling blackouts that demonstrated the vulnerability of modern society to a sudden shortage of energy supply. The effects were not limited to one country. The loss of industrial production in Japan disrupted global supply chains, halting automobile and electronics production in North America and Europe, and hitting the global economy. The accident at Fukushima threw a great question mark over the “global nuclear renaissance,” which many had thought essential to help meet the power needs of a growing world economy.
On the other side of the world, a very different kind of crisis was unfolding. It had been triggered a few months earlier not by the clash of tectonic plates, but by a young fruit seller in the Tunisian town of Sidi Bouzid. Frustrated by constant harassment by the town’s police and by the indifference of local officials, he doused himself with paint thinner and set himself aflame in protest in front of the city hall. His story and the ensuing demonstrations, transmitted by mobile phones, Internet, and satellite, whipped across Tunisia, the rest of North Africa, and the Middle East. In the face o
f swelling protests, the regime in Tunisia collapsed. And then, as protesters filled Tahrir Square in Cairo, so did the government in Egypt. Demonstrations against authoritarian governments spread across the entire region. In Libya, the protests turned into a civil war which drew in NATO.
The global oil price shot up in response not only to the loss of petroleum exports from Libya, but also to the disruption of the geostrategic balance that had underpinned the Middle East for decades. Anxiety mounted as to what the unrest might mean for the Persian Gulf, which supplies 40 percent of the oil sold into world markets, and for its customers around the globe.
These two very different but concurrent sets of events, oceans away from each other, delivered shocks to global markets. The renewed uncertainty and insecurity about energy, and the anticipation of deeper crisis, underscored a fundamental reality—how important energy is to the world.
This book tries to explain that importance. It is the story of the quest for the energy on which we so completely rely, for the position and rewards that accrue from energy, and for the security it affords. It is about how the modern energy world developed, about how concerns about climate and carbon are changing it, and about how different the energy world may be tomorrow.
Three fundamental questions shape this narrative: Will enough energy be available to meet the needs of a growing world and at what cost and with what technologies? How can the security of the energy system on which the world depends be protected? What will be the impact of environmental concerns, including climate change, on the future of energy—and how will energy development affect the environment?
As to the first, the fear of running out of energy has troubled people for a long time. One of the nineteenth century’s greatest scientists, William Thomson—better known as Lord Kelvin—warned in 1881, in his presidential address to the British Association for the Advancement of Science in Edinburgh, that Britain’s energy base was precarious and that disaster was impending. His fear was not about oil, but about coal, which had generated the “Age of Steam,” fueled Britain’s industrial preeminance, and made the words of “Rule, Britannia!” a reality in world power. Kelvin somberly warned that Britain’s days of greatness might be numbered because “the subterranean coal-stores of the world” were “becoming exhausted surely, and not slowly” and the day was drawing close when “so little of it is left.” The only hope he could offer was “that windmills or wind-motors in some form will again be in the ascendant.”
But in the years after Kelvin’s warning, the resource base of all hydrocarbons—coal, oil, and natural gas—continued to expand enormously.
Three quarters of a century after Kelvin’s address, the end of the “Fossil Fuel Age” was predicted by another formidable figure, Admiral Hyman Rickover, the “father of the nuclear navy” and, as much as any single person, the father of the nuclear power industry, and described once as “the greatest engineer of all time” by President Jimmy Carter.
“Today, coal, oil and natural gas supply 93 percent of the world’s energy,” Rickover declared in 1957. That was, he said, a “startling reversal” from just a century earlier, in 1850, when “fossil fuels supplied 5 percent of the world’s energy, and men and animals 94 percent.” This harnessing of energy was what made possible a standard of living far higher than that of the mid-nineteenth century. But Rickover’s central point was that fossil fuels would run out sometime after 2000—and most likely before 2050.
“Can we feel certain that when economically recoverable fossil fuels are gone science will have learned how to maintain a high standard of living on renewable energy sources?” the admiral asked. He was doubtful. He did not think that renewables—wind, sunlight, biomass—could ever get much above 15 percent of total energy. Nuclear power, though still experimental, might well replace coal in power plants. But, said Rickover, atomic-powered cars just were not in the cards. “It will be wise to face up to the possibility of the ultimate disappearance of automobiles,” he said. He put all of this in a strategic context: “High-energy consumption has always been a prerequisite of political power,” and he feared the perils that would come were that to change.
The resource endowment of the earth has turned out to be nowhere near as bleak as Rickover thought. Oil production today is five times greater than it was in 1957. Moreover, renewables have established a much more secure foundation than Rickover imagined. Yet we still live in what Rickover called the Fossil Fuel Age. Today, oil, coal, and natural gas provide over 80 percent of the world’s energy. Supplies may be much more abundant today than was ever imagined, but the challenge of assuring energy’s availability for the future is so much greater today than in Kelvin’s time, or even Rickover’s, owing to the simple arithmetic of scale. Will resources be adequate not only to fuel today’s $65 trillion global economy but also to fuel what might be a $130 trillion economy in just two decades? To put it simply, will the oil resources be sufficient to go from a world of almost a billion automobiles to a world of more than two billion cars?
The very fact that this question is asked reflects something new—the “globalization of energy demand.” Billions of people are becoming part of the global economy; and as they do so, their incomes and their use of energy go up. Currently, oil use in the developed world averages 14 barrels per person per year. In the developing world, it is only 3 barrels per person. How will the world cope when billions of people go from 3 barrels to 6 barrels per person?
The second theme of this book, security, arises from risk and vulnerability: the threat of interruption and crisis. Since World War II, many crises have disrupted energy supplies, usually unexpectedly.
Where will the next crisis come from? It could arise from what has been called the “bad new world” of cyber vulnerability. The complex systems that produce and deliver energy are among the most critical of all the “critical infrastructures,” and that makes their digital controls tempting targets for cyberattacks. Shutting down the electric power system could do more than cause blackouts; it could immobilize society. When it comes to the security of energy supplies, the analysis always seems to return to the Persian Gulf region, which holds 60 percent of conventional oil reserves. Iran’s nuclear program could upset the balance of power in that region. Terrorist networks have targeted its vast energy infrastructure to try to bring down existing governments and to drive up the price of oil and, in so doing, “bankrupt” the West. The region also confronts the turmoil arising from the dissatisfaction of a huge bulge of young people for whom education and employment opportunities are lacking and whose expectations are far from being met.
There are many other kinds of risks and dangers. It is an imperative to anticipate them, prepare for them, and ensure the resilience to respond—so as not to have to conclude after the fact, in the stark words of a Japanese government report on the Fukushima Daiichi disaster, that “consistent preparation” was “insufficient.”
In terms of the environment, the third theme, the enormous strides have been made to address traditional pollution concerns. But when people in earlier decades focused on pollutants coming out of the tailpipe, they were thinking about smog, not about CO2 and global warming. Environmental consciousness has expanded massively since the first Earth Day in 1970. In this century climate change has become a dominant political issue and central to the future of energy. This shift has turned greenhouse gases into a potent rationale for rolling back the supremacy of hydrocarbons and for expanding the role of renewables.
Yet most forecasts show that much of what will be the much larger energy needs two decades from now—75 to 80 percent—are currently on track to be met as they are today, from oil, gas, and coal, although used more efficiently. Or will the world shift toward what Lord Kelvin thought was needed and Admiral Rickover doubted was possible—a new age of energy, a radically different mix that relies much more heavily on renewables and alternatives—wind, solar, and biofuels, among others—perhaps even from sources that we cannot identify today? What kind
of energy mix will meet the world’s energy needs without crisis and confrontation?
Whatever the answers, innovation will be critical. Perhaps not surprisingly, the emphasis on innovation across the energy spectrum is greater than ever before. That increases the likelihood of seeing the benefits from what General Georges Doriot, the founder of modern venture-capital investing, called “applied science” being successfully applied to energy.
The lead times may be long owing to the scale and complexity of the vast system that supplies energy, but if this is to be an era of energy transition, then the $6 trillion global energy market is “contestable.” That is, it is up for grabs among the incumbents—the oil, gas, and coal companies that supply the bulk of today’s energy—and the new entrants—such as wind, solar, and biofuels—that want to capture a growing share of those dollars. A transition on this scale, if it does happen, has great significance for emissions, for the wider economy, for geopolitics, and for the position of nations.
The first section of this book describes the new, more complex world of oil that has emerged in the decades since the Gulf War. The essential drama of oil—the struggle for access, the battle for control, the geopolitics that shape it—will continue to be a decisive factor for our changing world. China, which two decades ago hardly figured in the global energy equation, is central to this new world. This is true not only because it is the manufacturing “workshop of the world,” but also because of the “build-out of China”—the massive national construction project that is accommodating the 20 million people who are moving each year from rural areas into cities.
The Quest: Energy, Security, and the Remaking of the Modern World Page 1