Daniel Yergin explores energy’s role in growing U.S. tensions with China and Russia

A new, cold war is developing between the United States and both Russia and China, Pulitzer Prize winning author Dan Yergin argued on Sept. 14 in the fall quarter’s first Energy Seminar at Stanford University.

Yergin took his virtual audience through three intertwining issues: energy, national security and climate change. Much of the discussion was based on his new book, The New Map: Energy, Climate, and the Clash of Nations. Yergin, who is vice chairman of the energy consulting firm IHS Markit, also discussed electric vehicles and the potential for revolutionary change in mobility.

“Are we headed towards one world, two systems?” Yergin asked, referencing the intensifying rivalry between the United States and China. “It's a kind of cold wars, but with both Russia and with China.” Many countries don’t want to be caught in the middle of this and don’t want to be forced to choose between the two systems, Yergin said.

Geopolitics

When China entered the World Trade Organization in 2001, the consensus was that the integration of China would be a positive for the world economy and for the United States, Yergin said. “But even before Trump became president that consensus was eroding,” he said. And now with China and the United States rivaling for power, Yergin questioned where this rivalry will lead both strategically and economically.

The geography of energy resources, trade routes and jurisdictions over regions tell the story of how energy came to be so important in geopolitics today, he explained. Examples of this include the U.S. shale revolution, oil within the Persian Gulf, the Chinese Belt and Road Initiative, Russian gas pipelines, and the South China Sea.

U.S. production of gas and oil from shale, for instance, led the United States to become the top producer of both gas and oil, and a net exporter of oil in the global market. This made the United States less susceptible to disruptions in oil production in the Persian Gulf.

China’s Belt and Road Initiative, launched in 2013, would further advance China in the world economy, consisting of railways, highways, border crossings, and energy pipelines stretching from East Asia to Europe. But for some countries involved, the initiative has already created debt related to infrastructure developments, culminating in a backlash against the project, Yergin said.

Last December, U.S. sanctions on Russia’s gas pipelines going into Europe were premised on the idea that the pipelines threatened U.S. national security, said Yergin.

“I don’t see how that pipeline threatens U.S. national security,“ Yergin said. “What those sanctions have done is push Russia and China even more closely together,” he added. He cited the opening of a Siberian pipeline connecting Russian gas to China, within weeks of the U.S. imposed sanctions.

He later displayed a map of the South China Sea showing China’s claim on the sea. “This may be the most dangerous map in the world because of the issues about who controls, who owns the South China Sea,” Yergin said.

There is an energy dimension to the sea with some gas and oil resources present there. But, Yergin said, “The real significance of the South China Sea is that it is the most important body of water for world trade and it is the body of water through [which] half of the world’s oil tankers pass.”

China imports 75 percent of its oil, a large part of which comes from the Middle East and Africa.

“The fear there is that the U.S. Navy, in the event of a standoff or confrontation over Taiwan, would interdict that oil,” Yergin said, explaining the importance of China’s claim over the South China Sea. “There’s no obvious resolution to this at all.”

Energy and climate

“It really seems to me that we can now divide the energy era between ‘before Paris’ and ‘after Paris’,” Yergin said, referencing the Paris climate conference of 2015.

The Paris Agreement has become a benchmark environmental policy for governments, financial institutions, and companies – especially energy companies, Yergin said.

A zero-carbon future has become the target, he explained. In reaching this future, one of Yergin’s research projects focuses heavily on what supply chains will look like. One scenario to achieve the zero-carbon target requires adding solar and wind energy capacity that would double the entirety of existing capacity today, he said.

The Revolution in Mobility

Yergin then turned his attention to electric vehicles and the potential for a new era in transportation.

“At least our baseline scenario is today’s 1.4 billion cars will be about 2 billion by 2050 and about 600 million will be EVs. But with more government pressure... that number could be higher,” he said. In Europe there could be fines on automobile companies not moving towards electric vehicles quickly enough, he said.

While EVs are still cars and will not bring revolutionary change on their own, Yergin said, the combination of EVs, ride sharing and self-driving cars would culminate in a different kind of industry that uses those cars between 18 and 24 hours a day.

“That would be really the revolution in mobility,” Yergin said.

The Stanford Energy Seminar occurs every Monday during fall, winter and spring terms at 4 p.m. PT. It is online, free and open to the public. Registration is required.