Daniel Yergin was at the St. Petersburg International Economic Forum in 2013 when he received a terrifying request: Can he ask Vladimir Putin the first question from the audience?
“I started asking a question, I mentioned the word ‘shale’,” he recalls, referring to the once obsolete source of oil and natural gas that flowed freely in the United States due to advances in production techniques. “And he started yelling at me like shell barber.”
Yergin, vice chairman of S&P Global, discusses the incident in the latest episode of the “What Goes Up” podcast, along with other insights from his book “The New Map: Energy, Climate and the Clash of Nations”. U.S. shale oil and gas have had a huge impact on geopolitics, people don’t recognize, Yergin says. This poses a threat to Putin in a number of ways, most notably as US natural gas competes with Russia in Europe.
Below are the lightly edited and concentrated highlights of the conversation
Q: How did the United States become a major oil and gas producer?
Answer: It was a revolution. From Richard Nixon through Barack Obama, ‘We want energy to be independent.’ And it seemed like a joke, it would never happen. But there was this technology called shell, which actually involved hydraulic fracturing, as it is called, combined with horizontal drilling. And there was a truly obsessive person – a very interesting one, the role of people obsessed with economic change – named George P. Mitchell, who was sure if you work somehow, even though the textbooks said it’s impossible, you can do it. And for 20 years, 25 years people laughed, but then it worked. Even his own company, people told him not to spend money on it. But if he hadn’t spent that money, I’m not sure we would have stayed where we were.
And then in the early 2000’s you started seeing wildlife – independent, as they say – small companies began to adapt to that technology. And then people said, ‘Oh, the US natural gas supply is going up instead of down. And then they said, well, if it works for gas, it probably works for oil too – around 2008, 2009. So all of this really happened around 2008, in the period when it really started, the Shell Revolution. And it has taken the United States from a completely different position. And if you told people in 2002 that the United States was going to be the world’s largest oil producer, bigger than Russia, bigger than Saudi Arabia, the world’s largest natural gas producer, and this year, the world’s largest LNG exporter, they would say you’re living in a fantasy world.
Q: As I read your book, I thought that the United States, as the world’s largest consumer of energy, is now increasing geopolitical tensions as a major producer. Does that make America’s influence different in this environment?
A: That’s right. I deal with a lot of things in the book, from Ukraine to the climate, but I start with the shell because the shell really had a huge impact on geopolitics that people can recognize. The story I tell in the book is that when I was at a conference in St. Petersburg where Putin was speaking – there were 3,000 people – I was asked to ask the first question. I started asking a question, I mentioned the word ‘shell’. He started yelling at me that Shell was rude. He knew that the US shell was a threat to him in two ways. One, because it meant that US natural gas would compete with its natural gas in Europe, and we see that today. And secondly, it would really enhance America’s position in the world and give it a kind of flexibility that it did not have when it was importing 60% of its oil.
The question began innocently. I was going to ask him a natural question about diversifying your economy. And I said ‘shell’ and shouting by him in front of 3,000 people, was a really unpleasant experience. Another person on the stage was Chancellor Merkel, who had been Chancellor of Germany for 16 years. And you can see the enmity between the two. But Merkel is now being criticized for pursuing a policy of nuclear disarmament that has made Germany more dependent on Russian gas. And the judgment of history changes little by little.
Q: How did everyone make Russia so wrong?
A: Now there is a kind of revisionism that the world should not have traded with Russia, Russia should not have tried to integrate into the world economy, especially since Putin has become more authoritarian. But, you said, well, what was the alternative? Leave it festering there? The best thing was to get it anchored in the world. Putin, he is now in power almost like Joseph Stalin. And I think he was becoming more authoritarian and those who have known him for years have said that Kovid has changed him. He was separated for two years. He did not meet with Western merchants. He did not meet with Western government officials. So I don’t think there was an option for Russia not to try to unite with the world, but obviously what is happening now is that the world, at least the Western world, is knocking on Russia’s door.
Q: Will Europe be able to continue its military presence without bowing to Russia, and when will it start to get cold again?
This is the question that now really weighs because in terms of oil, there is enough crude oil in the world. You have to turn it around, but in strategic stocks, in declining demand in China, you can handle it. When you get into products like diesel, it gets harder. And then you go to the hardest thing with natural gas, and that’s just like you go in the winter. So the big question now is whether they can replenish the storage so they can go through the winter, and however, not only stay warm, but be able to manage the industry. And I think we can say that Putin made all sorts of decisions that were unreasonable – that his army was really good, that Ukraine would not be able to resist, that the United States withdrew from Afghanistan, and that Europe was deeply divided. Was so dependent on them that they would say, ‘OK, it’s terrible, but life goes on.’ And none of that happened. But I think he’s still calculating. And he said that in the end, this energy crisis – and we’re in the middle of a huge energy market crisis – would be such a major threat to the European economy that the alliance that we have now would collapse. I think that’s his bet right now. And Achilles Hill is what you pointed out: what happens when Europe goes into autumn and winter. And we had at least one German, a very prominent industrialist, who said, ‘This is very dangerous for the European economy. We should have some talks with Putin. “
– With the help of Stacey Wong.
(This story was not edited by NDTV staff and was automatically generated from a syndicated feed.)