Daniel Yergin on Why Energy Prices Didn’t Soar Higher

[00:00:00] Speaker 1: Hello and welcome to FP Live. I'm Ravi Agrawal, Foreign Policies Editor-in-Chief. The ongoing war in Iran has been called the biggest energy crisis in history. That is from no less an authority than Fati Birol, the head of the IEA, or International Energy Agency. And the crisis is by no means over. Overnight, Saudi Arabia appeared to directly enter the conflict as it partnered with the United States to conduct military strikes on Iran-backed forces in Iraq. That comes after attacks from those forces. And also a strike by the Houthi rebels in Yemen, who are also Iran-backed. That shut down a Saudi refinery that is responsible for 400,000 barrels of crude a day. All of this has once again sent energy prices a bit higher today after a brief lull earlier this week. There are so many big questions here. If the war ends tomorrow, what are the longer-term repercussions of this conflict? Will countries try to make alternative plans for energy? Who are the winners and losers from these changes? In a moment, I will speak with a terrific guest, a real guru of the energy world. As always, we will take some subscriber questions. If you would like to join in, there's a discount sale on right now. We're also a podcast. Just look for FP Live on your favorite audio platform, and that's for free. Joining me now is Daniel Juergen, the world's foremost expert of the oil industry and its history. Juergen is vice chairman of S&P Global. He is the author of the Pulitzer Prize-winning book, The Prize, and most recently of The New Map: Energy, Climate and the Clash of Nations. Juergen also runs CERA Week, the world's premier energy conference. Daniel, welcome to FP Live. [00:02:10] Daniel Juergen: Daniel Juergen: Glad to be with you today. Good day to be talking. [00:02:13] Speaker 1: Juergen Juergen: Indeed. So the expert community says that the Iran War is a seismic event for the energy markets. The head of the IEA says it's the biggest crisis ever. Let's just start there. Why is this such a big deal? [00:02:28] Daniel Juergen: Juergen Juergen: Well, I think, first of all, it's the biggest crisis since the Second World War, which was actually also among many other crises, an energy crisis, but certainly in modern times. Juergen Juergen: And the reason is because the Middle East is so central, because 20% of world oil, 20% of LNG flow through the Strait of Hormuz. And it turns out it's not just an energy crisis, it also involves helium, it involves fertilizer. The products that will not be made because of the crisis will hit agriculture. So this is a seismic event for not only world energy, but for the world economy. [00:03:04] Speaker 1: Juergen Juergen: But I have to say, Dan, as we've been covering this story, it strikes me that things could have been much worse, right? So crude prices peaked around 120 a barrel. Even in the last week, they touched $100, but then they came down quickly. And these are not historic highs for the energy market. The sky hasn't fallen exactly. So at least in terms of crude prices, why has this crisis not been worse, or at least not as bad as many analysts were predicting a few months ago? [00:03:35] Daniel Juergen: Juergen Juergen: Well, first of all, you're right. The oil hit $120 a barrel roughly in 2008. And if you adjust for inflation, that's a higher price. But that was not really based upon any disruption. Obviously, what you're looking at here is the number one maritime choke point in the world economy, which is the Strait of Hormuz. Why it's not been worse is because the disruption has not been quite on the scale that people thought it would be maybe a month or two ago when they were really talking about $150 or $200 a barrel as inventories got drained. It's because some supplies did get through. The Saudis had built a pipeline system in the 1980s in response to what was called the tanker wars at that time, so they could move about half their supplies out. The UAE, Abu Dhabi has a pipeline. It can move half of its supplies out. There are strategic stocks, which mean government-controlled stocks. In the U.S., it's called the Strategic Petroleum Reserve. Some oil was released from there. And there are two other factors, though, Ravi, that really stand out. One is the change, the dramatic change in the position of the United States as an energy producer, and in particular, its ability to export not only oil, but oil products like jet fuel, like diesel, like gasoline. But I think the biggest surprise here of all this, you know, all much of this kind of you could do the numbers beforehand. The one that people couldn't calculate beforehand is the response of China, which replaced the United States as the world's largest importer of oil. And they cut their imports almost in half. And I'd have to say, no one could see that coming. [00:05:17] Speaker 1: Let's just dig into that a little bit more because, I mean, China is so opaque in many ways. How much oil, just to talk about crude here, how much oil was China importing pre-war? And do you have a sense of, you know, what are the size of its strategic reserves or how it was able to [00:05:36] Daniel Juergen: replace those potential imports? China's demand was around 16, 17 million barrels a day. It was importing around, you know, maybe around 12 million barrels a day. It has built up, as it has with many other products as well, strategic stocks controlled by the government. And it's thought that China has one and a half to two billion barrels of oil, which is a huge number in its stocks. [00:06:02] Speaker 1: I just want to linger on that for one second. One and a half to two billion, that is more than a year's worth of energy supply. [00:06:09] Daniel Juergen: Yeah. And then on top of that, companies have their own inventories. So China basically cut its, you know, by maybe its imports by five million barrels a day. How did they do that? Partly they drew, the Chinese do not like to buy oil when price is high. They like to fill inventories when prices are low. And so they really pay very close attention to the market. So they raised domestic prices, which affected demand and demand went down a couple million barrels a day. They stopped their refineries also export oil. They said no exports. And then they drew on their inventories. And so all of that was basically keeping the price from hitting that $150, $200 a barrel. And, you know, something the Chinese were also concerned about, as the vast, it depends so much on its exports to the world economy. It didn't want to see a global downturn. We can't, we're not party to that. We don't know, but that's been speculated. But certainly they were interested in protecting their economy. And they did that. And that taking 5 million barrels a day of imports out of the system relieved a lot of the pressure. And also, it's particularly significant because the Strait of Hormuz, in economic terms, flows east. 80% of the oil that went through the Strait of Hormuz goes to Asia. 90% of the LNG, liquefied natural gas, that goes through the Strait of Hormuz normally goes to Asia. So there was particular sensitivity in Asia to this disruption. And the challenge in China, like Japan, which is the other country that's built up large reserves, has that cushion of supply. And I'm just following your lead here, because as you [00:07:57] Speaker 1: mentioned Asia, you know, I realized at the start, we said that things weren't as bad as we thought they were going to do. But that said, Asian economies, South and Southeast Asia mostly have really suffered from this crisis. There have been countries that have run out of cooking oil. You know, universities have been shut down. Governments have asked their workers to stay home for a day a week. And all of this, we don't have full data yet, but this is going to lead to an economic slowdown. Yeah, in Bangladesh, I think four [00:08:29] Daniel Juergen: out of the five government-owned fertilizer plants shut down because they couldn't get supplies. And India, which had come to depend very much on propane for cooking, and it was a huge program that went back. I remember I was in India 10 years ago when Prime Minister Modi launched this program to send propane so people would stop burning wood and waste for cooking. That was very dependent on the Gulf, and they ran short. And as you know, restaurants in India shut down. And so a lot of hardship there. Businesses failed, rationing of supplies, and it fell disproportionately on the poorer countries. [00:09:09] Speaker 1: So if this war ends tomorrow, magically there's some sort of a resolution, and we see no further conflict, and the Strait of Hormuz gradually gets back to normal. I'm not saying that'll happen, but let's just assume that's the case. What happens then to energy prices in the near term? [00:09:31] Daniel Juergen: It's already been signaled by whenever they think peace is at hand, and negotiations are going to begin. We saw crude oil, which had been about $100 a barrel or more, went down as low as into the low 70s. So that tells you prices will come down, the market will come down, it will take time to replenish, it will take time to get refineries operating again. But then you would have an adjustment. But, you know, this is so volatile. You know, you see the oil price bouncing around. And although people are not focusing on it, more severe is not the price of crude oil more significant. What is that price of diesel? It's the price of jet fuel and so forth. And what it means for farmers and fertilizer. So we will see continuing impacts on agriculture. Yesterday, I was in a discussion about Brazil. Brazil is being hit hard. It's agriculture because of its dependence on the Gulf for supplies. So people didn't, you know, when the crisis happened, if we've been talking on February 27th, Ravi, and you'd said to me, Dan, there may be a war. What's the impact? You know, most people would have thought, okay, oil. Some would have thought LNG, natural gas, but who would have said fertilizer? Who would have said helium that you need for manufacturing semiconductors? Who would have thought aluminum? Who would have thought sulfur, which you need both for mineral mining and for making fertilizer? People didn't realize, I think, just how significant the Gulf region had become for the world economy. The change from where it was 20 or 30 years ago. And by the way, they have one other really big export, which has been very important, which is called money. Their sovereign wealth funds, multi-trillion dollars of sovereign wealth funds. Those are big sources of capital for the world economy. [00:11:36] Speaker 1: Mm-hmm. And many of the countries in the region are expecting downturns this year. I think Qatar, especially, is projecting a pretty severe contraction. So... [00:11:46] Daniel Juergen: Yeah. Can I just say, because Qatar, I'm glad you pointed out, because we talked about Abu Dhabi and Saudi Arabia having alternatives. Kuwait is in a very difficult position because they don't. Qatar, exporting LNG, you can only do it by ship. The other country that's really been hit hard is Iraq. And we've seen this kind of remarkable announcement that, again, if you said it three or four years ago, people would not believe it. In order to secure Iraqi exports of oil, there's now serious discussion of building a pipeline across that very secure and stable country called Syria. Right. You know, who would have thought? [00:12:24] Speaker 1: It's a brave new world. So as we look at, you know, we've been discussing the last few months and where energy is right now. I want to try and explore the longer-term changes that will come about because of this conflict. And I want to look at countries, and then we can also get to the private sector and also specific industries. But let's start with countries. So the crisis has impacted energy exporters and importers in different ways. My sense is that many of them don't have the same trust in supply chains as they once did. No matter how this gets resolved, I think they're going to be more skeptical about not only the Strait of Hormuz, but any kind of choke point dependency. What's your sense of how countries at this point are beginning to think about longer-term adjustments they'll have to make? [00:13:14] Daniel Juergen: Certainly, choke points has now become part of the geopolitical vocabulary. Before, it was a very limited number of people who talked about choke points. I think I'm glad you used the word supply chains because it's really part of a larger phenomenon. This is writ large, but the kind of shifting view of supply chains that began about 2019-2020 was accentuated by the COVID crisis and then by the rising tension between the U.S. and China, where supply chains used to just be about efficiency and you didn't think much about security, you didn't pay a security premium, you just wanted the quickest, most efficient. Now it's shifted to you've got to think about security, you've got to think about resilience, and that affects certainly the case here. I think the Gulf countries, for their sense, are going to seek to diversify basically from dependence upon the Gulf, and that does mean pipelines. Now, in the case of Saudi Arabia, it means pipelines going to the Red Sea, and you have there the issues of the healthies, but I think that's very much on the agenda. And in general, I think you'll see a movement to diversify sources. I think kind of a rebranding of renewables is going on right now from climate and emissions to resilience and energy security and independence. That's going on. And I think also it means other regions are going to get a big boost in terms of investment and attention. [00:14:56] Speaker 1: I have to ask though, when you speak of resilience, doesn't that disproportionately sort of advantage bigger countries or richer countries and leaves a lot of other ones behind? [00:15:10] Daniel Juergen: Yeah, I do think that's the case, that if you can afford it, if you're Japan, you can afford to have large strategic stocks. If you're a less, you know, a developing global South country, you don't have that same ability. But it also, you know, frankly, Europe forgot about energy security. And they're rich, you know, it's a rich reason, but they're going to have to do it too. But it is, and obviously the U.S. is in a particularly position that China wishes it was in. The U.S. went from being the world's largest importer to being the largest producer of oil, the largest exporter of natural gas. So you talked about the impacts on Asia, where, you know, really hit people's incomes and livelihoods and led to rationing and shortages. In the U.S. it's been mainly measured in terms of what happens at the gasoline pump. And, you know, prices... [00:16:07] Speaker 1: And prices, they're up by about a third since last year, right? [00:16:10] Daniel Juergen: Yeah, that's right. And they're about a dollar higher. That's right, a dollar higher. They've gotten up to about a dollar 50. And as we know, there's no price in the United States that is more politically sensitive than gasoline prices. And that does... I mean, we're a big country, but the people, lower income people who have to commute 40 miles a day to their job and have not been able to afford to buy an electric car or don't have charging, they're the ones who get really hurt by that. And then it is the pervasive impact on inflation. And even in the United States, because our team at S&P Global did a calculation once that about 70% of the food on your table is actually energy costs from fertilizer to diesel for your tractor to getting it to... transporting it from farm to destination processing and so forth. So those costs are going to work their way through the system over [00:17:10] Speaker 1: time. Fascinating. I want to linger just a moment on the United States. S&P Global also had some great research on how the United States is set to become the biggest net exporter. Sorry, natural gas will become its second biggest net export in about five years. It's striking to me that as you were talking about the price of the pump, which is crude related, and that sort of tends to have a global price point that affects all countries relatively equally. But gas is just so different because the United States is able to afford or sell gas at a far, far lower price point than, say, what Asian economies are able to access. And that, in a sense, has become one of the big changes between now and, say, a decade ago, right? [00:18:05] Daniel Juergen: Absolutely. I mean, just to put in context, second largest exporter, that means three times the value, three times that of all the Hollywood and television programs. It means about three times corn, two and a a half times soya, three times soya beans, and also 70% of the value currently of semiconductors, but it will go to that number two position. And what's happened is, it's the shale revolution. And the shale revolution saved Europe from Vladimir Putin, because we wouldn't, you know, because of their, our ability to send LNG to them, meant that Putin's thought he could use the gas weapon and shatter the coalition supporting Ukraine. It failed at some cost, but because of US LNG right at the forefront of it. At the, at our CERWIC conference, which you mentioned, the German economy and energy minister in March said that the number one thing that really saved them was exports of LNG from the US, Yes, along with supplies from Norway and other countries and Gutter at the time. But we basically have a 40 years of, of known certified natural gas reserves. So that means that we can build up exports of LNG, but our volumes of actually, we still have more gas every than we, even though we're exporting LNG. And so that means natural gas prices in the United States, wholesale prices have actually gone down since this war started. And this, these low prices give the US an economic advantage as a manufacturer over Europe and other parts of the world. [00:19:51] Speaker 1: Which has immense geopolitical ramifications. I mean, in as much as the price at the pump, which is crude, has some impact on the thinking of, you know, the White House on, on how long, how long it can tolerate this war. The fact that natural gas prices are down is very telling because that, that has a range of impacts. I want to talk a little bit about the private sector, which you know very well. I mean, you get to speak to all these energy executives at Sarah Week and elsewhere. What is your sense of how they are thinking about the post-Iran war landscape? [00:20:24] Daniel Juergen: Well, I think it's still early. I think their first thing, of course, was the security of their people, the security of their systems and the partners that they work with in the region and trying to, you know, do you keep your people there or not? And I think it's varied from country, from company to company, whether you withdrew some or not. But I think what it does is it means that they will look at other regions, they'll look at the Western Hemisphere. Even before the crisis, the Western Hemisphere is actually producing more oil than the Middle East, which, you know, was a surprise that, you know, I mean, Brazil produces four times as much oil as Venezuela right now. And they're going to be looking, I think it's seen, it's thought that Africa will be a beneficiary of investment. I see a step up of activity in the Eastern Mediterranean as an alternative source of gas to Europe, which it already is. So I think there'll be, you know, diversify supply. It's still early because remember, people have these capital budgets that, you know, investments that go out five or six years. But there is a, we were seeing this even before the crisis. The industry had become, a lot of the industry become very focused on the United States, because the United States went from producing 5 million barrels a day to currently 14 million. And so, but you started to see people saying, well, at some point, the US is going to peak out, we have to go back and start exploring for oil more seriously than we did before, because kind of, you didn't have to explore with shale. It was just a different business. And now I think exploration was back on the table and this is going to accelerate it. And it will really be up to governments how to be competitive to draw in the investment. [00:22:16] Speaker 1: But in this moment of immense geopolitical risk conflict, I mean, do companies have any confidence to even think about, you know, pipeline investments or exploration? [00:22:29] Daniel Juergen: Yes, absolutely. I mean, the Iraqi Syria pipeline is in partnership with a US company is actually championing it. Big US investment firms have announced major investment in pipeline systems within Kuwait, as Kuwait was, you know, opening up. So, you know, household name companies. So I think that it's there. I mean, I think we'll see, you know, the autumn will be a critical time because there's some very big conferences that are being held in the region at that point. And, and I think the region is going to go out of its way, those countries to, you know, restore confidence. So I think people do want to maintain their partnership, show their support for those countries, as they're having facilities being attacked in ways that had never been expected. But also, those countries themselves will be spending more money on defense and thinking about it in a way that they hadn't in the past. But, you know, it's funny, you'd say after six months, people would have remarkably changed their plans. It just doesn't happen that fast in the energy industry, because you're talking about investments that take five or seven years. [00:23:47] Speaker 1: Right, right. I have to ask because energy's had such a disproportionate impact on geopolitics and foreign policy over the last several decades now. What is your sense of where energy demand is headed? I mean, at what point does it peak given, you know, populations peaking at a certain point? You know, there's all this talk of declining fertility rates in places like India and even Nigeria. And so many of our older growth projections are now off by a bit. [00:24:17] Daniel Juergen: Right. Yeah. I mean, that's very interesting, because some of the projections about climate and things like that were dependent upon the notion of a 14 billion person world. And it sure doesn't look like we're going to be a 14 billion person world. And is it nine or 10 billion people? I mean, what you say about fertility rates? I mean, that itself is such an incredibly important, fascinating question. I think that the arguments about energy demand are both analytical and theological, depending upon various points of view. What we've seen so far, is that energy transition is not going the way people thought it would go. It's been slower. There are many challenges to it. And it's really been energy addition. Because if you look at the numbers, you see wind and solar have become since 2010 have been commercial, growing a lot. But conventional energy has been growing a lot, too. But I think, you know, open question, what will the impact of this crisis when it's over? How will that change the direction? I think for China, it accentuates their drive for electrification, particularly in vehicles. And I think we've seen, you know, at the first couple of months of this year, electric car sales in China were running about 36%. Now they're running at 60%. And so, and I think other, if people have the grid, they'll look at it. I think that the views have been pretty consistent thinking that oil demand probably peaks somewhere in the early 2030s. But as one of my colleagues wrote, this is the first energy crisis of the EV era. And so we'll see how that I mean, I think that's something to watch how that accelerates it. I think natural gases thought will peak longer before it flattens out. But a lot of that does have to go back to the population numbers you're talking [00:26:26] Speaker 1: about. Which are anyone's guess, right? I mean, that's an involvement number. [00:26:31] Daniel Juergen: Yeah. And we're doing a study now called Pathways, trying to look at it from a global south point of view of their energy demand, not through the window of the global north. [00:26:45] Speaker 1: I have to say, when you just said the energy transition hasn't worked out as we thought it would, why is that? Because I mean, on the one hand, you know, solar and wind is cheaper and more affordable than it's ever been. China has, you know, been able to produce so much of it and expand capacity to such a degree. You know, is it just that countries haven't been willing to take on China's supply? [00:27:12] Daniel Juergen: No, I don't think that's it. I think there are a whole host of reasons. I think that the concept of energy transition really needs a big rethink, because it was very ambitious. It was divorced from any previous experience of energy transitions. I, you know, I think the scale, you know, changing $120 trillion world economy overnight, pretty ambitious, the costs have been underestimated. The needs of this south, the global south, in terms of development and rising incomes were underestimated. Energy security was forgotten about until it came back and hit people in the face. The issue of energy transition is mineral intensive. Electric car uses three times as much copper as a conventional car. How long does it take to bring a new copper mine on? 17 years. And that gets you into China. Then data centers, suddenly this new focus on electricity. So I think, and then, you know, for Europe, it was very interesting having the German economic minister at Syrah Week. She talked about that this single focus on renewables had really undermined the competitiveness of the European economy. She said leading to deindustrialization, obviously having a big impact in terms of parties on the far right and far left, costs much higher than they should have been. That, that, yes, you can build renewables, but you have to build a second system, as she put it, a second pillar to deal with the volatility. So I think all those factors were kind of, kind of, people just didn't know that you needed to look at those things, too. But you couldn't just look at energy transition and forget about competitiveness, forget about geopolitical tensions, forget about economic growth. And I think there was lack, you know, I guess I hadn't thought about it this way, but there was lack of integrated thinking about energy transition. [00:29:15] Speaker 1: I mean, it's hard to dispute any of the facts of what you're saying there. But on, you know, on the other hand, you have wildfires right now across France and Spain. And, you know, clearly there are people there who are thinking that, quite rightly, that climate change is having dramatic effects on their lives. And at some point, policy needs to catch up. What is your sense of... [00:29:39] Daniel Juergen: Well, but I think if we take wild, the wildfire question in the United States, from about 1990 onward, we stopped managing, they changed the way they managed forest fires. And even Governor Jerry Brown, Democrat, liberal Democrat in California said, "We haven't been managing our forest right. We're allowing them to turn into carbon bombs, because we're not having controlled firing, we're not cleaning underbrush." And so, you know, I don't know about Europe, but certainly in North America, there are policy issues for it, as well as climate issues. [00:30:12] Speaker 1: Yeah, I'm not saying that climate change is the sole reason why this happens. It's a one of many, many factors. And of course, it's not desirable to have higher temperatures the way we do. [00:30:24] Daniel Juergen: By the way, when you do have forest fires, you release a lot of carbon. Yeah. So managing forests better would actually be a way to reduce carbon emissions. [00:30:32] Speaker 1: Absolutely. But what is your sense of how everything we've been discussing, and the addition of fossil fuels, the way we've seen them being added on in the last few years, what does all of this mean for the clean energy movement? [00:30:47] Daniel Juergen: Well, I think it's what I've suggested. I mean, you're quite right, the impact in Europe this summer, the rediscovering of the virtues of air conditioning, rather than regarding it as immoral, but actually something that improves productivity. I remember Lee Kuan Yew, the founder of modern Singapore, saying the greatest invention of the 20th century, or 19th century, whenever, was air conditioning because it made the tropics productive. Yeah, I couldn't agree more. Yeah, yes, exactly. I mean, you know, from your own experience. But, you know, these are tough questions. But, you know, if you look at the far right parties in Europe, obviously, immigration is their number one issue, but very much also about high energy costs. So they're not easy trade offs here, that you can just say you do one thing or the other. And by the way, you know, England's emissions, like are 3% of China's, right? So what they do in England, you know, looks good. Not going to move the needle. Yeah, I mean, they say they want to set an example, but it doesn't move the needle. What matters is what happens going back to where you started before, in the big countries in the global south, and how they develop and how they find the balance. I go back to, we do an Energy Asia conference, and we had the Prime Minister of Malaysia saying, you know, he said, we're concerned about climate, but we're not going to be dictated to by Berlin, Brussels, and other countries, and other cities in Northwest Europe, and at that, you know, or North America, because we have to worry about economic growth, we have to worry about health, we have to worry about poverty. So, you know, that's why, that's why I say, you need to rethink and into, you know, it's I really hadn't thought about before till we talked about but an integrated approach to it, because, you know, you got to address those issues around climate and weather and, you know, these unprecedented forest fires, but you also have to keep people employed. [00:33:03] Speaker 1: Right. Yeah, and what you described from the Malaysian minister is a common refrain I hear from leaders across the global south. I mean, they have populations that are, you know, growing in economic might, and they want to purchase more, they want to grow more, they want to put more food on the table. They are increasingly becoming meat eaters, you know, that has a carbon footprint, I mean, everything costs more. So, you know, the growth imperative is quite real, and there are politics behind this in that, you know, they need to stay in power as well to push through a lot of this growth. So I think really, Ravi, you've just set out the problem. Yeah, yeah. No, indeed. And the solution might just be the integrated thinking that you're you're describing, because it's, you know, it's clear we need an energy transition. But if it didn't work, then we need to ask why it didn't and what we can do differently. [00:34:00] Daniel Juergen: And if you bring to power governments who want to dismantle the whole thing, which is a real risk in Europe now, that's a cost too. [00:34:11] Speaker 1: Indeed. Let's talk about a few industries and how they might change post-Iran war. Let me bring in a subscriber question. This one's from Dario Polsky, who asks, what impact you might see on the development of nuclear energy after this war? [00:34:28] Daniel Juergen: Well, I think nuclear has already had, really for about the last three or four years, a new energy to it, that it's really been embraced, you know, small modular reactors, you know, nuclear power plants that were shut down in the United States are being going to be brought back to life and so forth. I think it was a lot of that. I mean, it was partly driven by actually, again, going back to the German minister, she said, we shut down our nuclear in Germany, we shut down our largest carbon free electricity. So it has that advantage. I think hyperscalers are very interested, the big tech companies in it for that reason, because they need electricity. So I think, so I think there's been a big, you know, a new boost to it anyway. What is it, seven or eight billion dollars of venture capital money in fusion? That would have been unheard of 10 years ago. And I think there, in that question, this gets a new push to nuclear as another form of diversification. - What about geothermal? - Geothermal, you know, it's been around for a long time. [00:35:44] Speaker 1: - Why don't you quickly just describe what it is, I think, for our viewers? [00:35:48] Daniel Juergen: - Yeah, geothermal is basically, you drill down into the earth, and you have heat, and you use that heat to heat water, create steam, drive a turbine up above. So it's a form of renewable energy. And it's been around, but it's been very, kind of pretty fringes. But now what has happened, entrepreneurs, partly with the support of hyperscalers, are adapting the techniques of shale gas and shale oil, to call it shale geothermal, drilling down and then having horizontal drilling, and then much more contact with heat, much greater efficiency. So there's some big projects going on right now in Utah and other places. And so I'd say geothermal, which, you know, again, was one of those things not on the agenda four years ago in any serious way, is now something that's getting a lot of attention. [00:36:53] Speaker 1: - Let's talk about winners and losers for a minute. I think it's clear that this war has produced many, many different types of losers in different buckets, whether it's countries, companies, specific groups of people, even industries. Are there any geopolitical winners in your mind? [00:37:15] Daniel Juergen: - I would say Latin America. I would say Latin America. I would say Canada, which is going through a sea change in policy under Prime Minister Carney. And I think certainly, because of its relative position, the United States. But ultimately, this is bad for everybody, because it's bad for the world economy. [00:37:42] Speaker 1: - Just explain your thinking on Latin America there. What did you have in mind? [00:37:46] Daniel Juergen: - Well, Latin America, if you have political stability, you look at Argentina now, which there's now a shale revolution going on there, and production going up significantly and investment going in there. I think, as I said, Brazil is much bigger than people recognize. Canada is bigger. But obviously, the country to watch is Venezuela. And I think there's probably more interest now in Venezuela than there was on February 27th. [00:38:19] Speaker 1: - What is your sense of the prospects there? Because, I mean, from everything I've read, the system there has just been so ruined. The corporate structures, the brain drain, all the best talent in the world lost over the last five decades. Can any of that come back online? [00:38:40] Daniel Juergen: - Well, yeah, you're right. You go to Calgary, or you go to Stavanger in Norway, or even go in the Middle East, and you find among the leading people in those industries are Venezuelans who are at that diaspora. You know, I think there's a mixed message that there's some short-term gains to be had. Significant investment will require political stability, contractual stability, things like arbitration, respect for contracts, and all that, I think, will have to be demonstrated before people spend big money. But there are opportunities there now. For instance, offshore natural gas of Venezuela that's adjacent to Trinidad can be developed. And I think smaller companies will go in and see opportunities. And those who have had positions there, some of them are going to step up their investment and restore. But as you say, the industry has been ruined both in terms of human capital and in terms of physical capital. People were taking, you know, equipment from the fields and selling it, stealing it for scrap metal to sell. [00:39:58] Speaker 1: - Right. What a tragic story. - Yeah. - This has been a masterclass. Dan, we'll have to leave it there. [00:40:04] Daniel Juergen: - Good. Pleasure talking with you. Thanks. [00:40:06] Speaker 1: - Thank you so much. And that was Daniel Juergen, Vice Chairman of S&P Global, the author of the prize, and most recently, The New Map. Lots more coming up on FPLive next week, how the global economy has been weaponized. We were just talking about choke points earlier today, but Eddie Fishman, the author of the book Choke Points, will tell us about the new tools of economic warfare and how to navigate this new world. You can register for that right here on the site. I'm Ravi Agrawal. Thanks for watching. [00:40:39] Speaker ?: you