Has Daniel Yergin changed his tune(s)?
Yergin’s points in Chapter 1
1. Oil prices collapsed in 1998 because of excess supply. OPEC had enormous spare production capacity.
(So, why didn’t OPEC’s cartel collapse via rampant ‘cheating’ by its members?) As a result oil companies
downsized. When growth resumed,
supply could not meet demand, so prices rose … astronomically … to a level of real price not exceeded
since the aftermath of the
Iranian Revolution.
2. But the high real prices had less impact upon global economic activity than expected. Relative
importance of oil to the world economy is less today. Central banks have learned how to handle sudden
prices of energy. [This is disputed: How did
the collapse of a housing price bubble relate to a subsequent (12-18 month later) bubble in commodity
prices, including oil? Emergence
of a new buyer (China) which didn’t experience (yet) collapse of a real estate bubble.]
3. High prices “revived resource nationalism” “as expected.” Gov’ts of petro-economies have much
greater revenues.
4. Peak Oil theory underestimates the impact of new technologies and new discoveries, esp. at the
“deep water” frontier.
5. Markets respond with a lag. It takes time to make new discoveries, develop fields for production,
build transportation facilities, refineries, and electric generating plants. So when the price of oil
discourages investment in such infrastructure, there will be a time lag later after prices rise before
supply can catch up with demand.
[What are implications for a global economic recovery in late 2010 or 2011?] CERA believes that world
energy production may increase by 20% from 2007 to 2017. Wow!
[Does this presuppose rapid growth of demand to motivate investment in oil production?]
6. The market for natural gas is becoming global as a result of a growing network of pipelines [and
maritime transport, I add].
7. But policies intended to avert additional climate warming will reduce growth in demand. And
spending on energy research and production – including non-traditional and renewable sources – is
growing rapidly. Won’t these trends conflict?
8. So CERA sees three scenarios to 2030. “Asian Phoenix” “Break Point” “Global Fissues”
[Pay me more and I’ll tell you which to plan for ;) ]
9. Energy consuming countries should distinguish between ‘energy dependence’ and ‘energy security’.
10. China and India need to be “engaged” in “the global network of trade and investment” rather than
forced (?) into mercantilist policies. To achieve this,
conditions must be right to persuade both countries that they will not be disadvantaged in global
markets. [Is Yergin’s implicit warning not to repeat the
mistakes of isolating Japan or not to repeat the experiences of the 1960s and 1970s when the national
companies of rapidly growing European and East Asian countries cut deals with producing states to
leave most of the profit with these states?]
11. Regulatory and environmental flexibility must be built into markets. Otherwise, producers and
consumers will turn to exclusive bilateral deals. From a economic standpoint this is a much less efficient
arrangement.