"As the world returns to whatever the new normal is, we’ll see prices responding to it. We’re already seeing that."

 

The IEA and OPEC are very concerned about oil demand in the first half of the year. But you’re optimistic that oil demand can get back to where it was?

 

Mr. Yergin said he believes that, by 2022, oil demand will likely be back where it was in 2019. Once vaccines have been deployed, he expects promising demand increases by the third quarter of 2021.

 

What do the new Biden administration and new energy policies mean for the United States, and then the follow-on effects to the global energy mix?

 

With several appointees from the old Obama administration, Mr. Yergin is confident the Biden team will ramp up the US climate policy. He thinks the pressure is going to be around jumpstarting charging stations, regulation, permitting, and incentives for EVs. “I think the debate in the administration is going to be how hard can they push on the existing oil and gas industry?”

 

Already we’ve had the canceling of the Keystone XL pipeline... What kind of backdrop does that give to the audience here today about investing in North American hydrocarbons?

 

“I think that the investment will continue,” said Mr. Yergin. Once prices move into the $50–65 range, he says investment will increase. “But I think there’s going to be more regulation. One big question is around drilling on federal lands, which is very important to some states.” He wondered if it could be harder to do new infrastructure projects, although the administration is in favor of job creation. He said things will become clearer as the rest of the administration appointments unfolds. “But it’s a group that’s coming in on energy who’s really focused on climate.”

 

Do you think the US will remain as energy-independent?

 

Mr. Yergin expects the US to start growing again, but not at the torrid pace seen during the last decade. “I think that the US is going to have to keep its eye on this because otherwise there are going to be some really severe economic consequences. And you can have a lot of money flowing out of the United States.”

 

Is the investable side of things a concern for the industry?

 

The fact that there won’t be financial backing? “Companies are adjusting to that,” Mr. Yergin replied, “It’s not going to be growth at any cost.” He says there will be a focus on what can be given back to investors, and a lot of attention paid to ESG—not just emissions, but governance and much more.

 

How worried are you about the relations between some of the biggest consumers and indeed the biggest producers and, primarily, the US-Chinese relationship?

 

“I think the biggest foreign-policy issue for the Biden administration is going to be relations with China. The biggest issue for China is its relationship with the United States.” He said the problem is that these two countries are so intertwined with each other and the rest of the world. He thinks it will be the number one geopolitical issue in the world, particularly as China’s GDP size approaches that of the United States.

 

The relationship between China and its suppliers, Russia, the Middle East... these will grow somewhat, will they?

 

“Absolutely.” Mr. Yergin said the China-Russia relationship is based on oil and gas, and a kind of common opposition to what they see as a US-led international order. “So I think that’s a very big and important factor in global politics in this decade.”

 

The extraordinary relationship between Saudi Arabia and Russia has blossomed really over the last couple of years.

 

Mr. Yergin said the the Saudi-Russian relationship is the foundation of OPEC plus. “If you look at last year, the leadership role in the global oil market was the United States, the number one producer. Now, Saudi Arabia is back in the sort of what we might call the leadership position. But that relationship with Russia is absolutely foundation stability in the market.

 

Is the Middle East region’s future assured?

 

Mr. Yergin said that, since some of the countries are very heavily dependent on oil, he expects to see more diversification. Abu Dhabi really started that in 2007, and about 60% of its GDP is now non-oil. “That’s an incredible achievement.” Saudi Arabia is trying as well with its Vision 2030 program. “But it’s hard to diversify a much larger economy, and it’s harder when you have COVID.”

 

What is the energy transition? Is it going to be decarbonization? Is it going to be lower carbon energy or zero carbon energy? That’s the key point for our audience here, isn’t it? Nobody knows exactly what the transition is going to be.

 

Mr. Yergin agreed that it’s not clearly defined, and that it tends to mean conflicting things if you’re in the energy world or the climate world. “I think there’s a lot of things that are thrown around, not looking at the numbers, not looking at the consequences. So directionally, it’s clear that the world is going towards lower carbon. But I think the scale of it is not fully understood. In 2019 we had an 87 or 88 trillion dollar world economy that depended upon fossil fuels for 80% of its energy. You don’t just change that overnight.”

He remarked that even the CEO of General Motors recently said they’ll spend more on EVs than on traditional cars, but that traditional cars using gasoline will still be around for a long time. Mr. Yergin also emphasized that energy transition, for very practical reasons, means different things for different countries. “If you look at India, for them, energy transition means not only wind and solar, it’s natural gas and oil and getting people not to be burning wood waste products and indoor pollution, which is a huge health problem.”

 

If we could sort out methane capture, then the industry looks a lot cleaner, a lot quicker. So technology within the hydrocarbon industry is one of the solutions.

 

“You need companies that know how to do projects, who can deal with scale, manage technology, and execute. So Baker Hughes and many other companies that are represented in this meeting are part of making the energy transition. And, it will be a transition that will involve continued involvement and a lot of oil and gas, but in a cleaner way.