Getting to Know Daniel Yergin
Posted by Dave Cohen on August 18, 2006 - 4:16pm
Topic: Policy/Politics
Tags: cera, daniel yergin, ihs energy [list all tags]
This Washington Post It's Not the End Of the Oil Age (July 2005) is vintage Daniel Yergin.
We're not running out of oil. Not yet...The social function of such text, aside from questions about the accuracy of the message, is to reassure the public that the tightness in global spare capacity and high oil prices do reflect market fundamentals. However, the market and production capacity—potential supply—are currently out of balance. These are temporary conditions due to factors explained below. Everything will work out fine if we are patient and wait a few years.But it is oil that gets most of the attention. Prices around $60 a barrel, driven by high demand growth, are fueling the fear of imminent shortage -- that the world is going to begin running out of oil in five or 10 years. This shortage, it is argued, will be amplified by the substantial and growing demand from two giants: China and India.
Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.
Also, it might be possible to find some likely answers to Chris Skrebowski's questions about CERA's latest report which, as always, carries Yergin's imprimatur.
... CERA's estimates (which escalate dramatically after 2011) are frankly just plain fantasy.Strong language.This raises two immediate questions: First, did CERA just start with the answer -- 110 million b/d in 2015 -- and then work backwards to fit? Second, on whose behalf or behest are they issuing this nonsense?
Brief Biography and History of CERA
Daniel Yergin went to Yale and got a PhD in International Relations from Cambridge in 1974. He is the Pulitzer Prize winning author of among other works The Prize: The Epic Quest for Oil, Money, and Power (1992), a definitive extensively researched history of the oil business. In 1983, Yergin co-founded Cambridge Energy Research Associates (CERA) along with Joseph Stanislaw and James Rosenfield.
It appears fair to say that Yergin has never been much involved in the day to day operations of CERA. Until recently, that was handled by Stanislaw and Rosenfield. In 2003, CERA hired Emily Nagle Green to replace Stanislaw. She brokered the takeover by IHS Energy in 2004.
Before joining Yankee Group, Green was the CEO and member of the board of Cambridge Energy Research Associates (CERA), the preeminent research and consulting firm in the energy sector, and led its sale in 2004 to IHS Energy (Englewood, Colo.).CERA has been a profitable acquisition. From the IHS 2005 annual report:
Energy revenue totaled $242.3 million in 2005, up 30 percent, with organic growth contributing 13 percent and acquisitions contributing 17 percent. Cambridge Energy Research Associates (CERA), acquired in the fourth quarter of 2004, contributed most of the growth from acquisitions in this segment.Today, the COO is Robert Lockwood (use the CERA link above) who "prior to his appointment at CERA ... was Managing Director of Worldwide Consulting for IHS Energy."
Yergin as a Symbolic Leader
Daniel Yergin's title at CERA is Chairman. That's all. As a cursory look at any press release or actual report reveals, it is Robert Esser and Peter Jackson who oversee the work. Day to day operations are handled by Lockwood. Yergin functions as a symbolic leader.
In an effective [symbolic] leadership situation, the leader is a prophet, whose leadership style is inspiration. While in an ineffective leadership situation, the leader is a fanatic or fool, whose leadership style is smoke and mirrors. Symbolic leaders view organizations as a stage or theater to play certain roles and give impressions; these leaders use symbols to capture attention; they try to frame experience by providing plausible interpretations of experiences; they discover and communicate a vision.In his role as prophet or fool, Yergin does indeed "communicate a vision" which is Cornucopian—the mythical "horn of plenty" which supplied its owners with endless food and drink magically (from Wikipedia). This stance tends to drive some reality-based people concerned about peak oil a little crazy (cf. Skrebowski above). Other Cornucopians include Michael Lynch, Leonardo Maugeri, Michael Economides, the IEA, chief executives of the major oil companies like "Lord" John Browne of BP and finally anyone with an abiding faith in abiotic oil (eg. Thomas Gold).
Tying in the symbolic leader role to CERA's business and his constant reassuring presence in the media, it becomes immediately obvious that Yergin is
- a valuable asset for CERA/IHS, supplying a voice of authority which attracts clients and therefore enhances profits
- a bearer of the "Good News" to those many who are perplexed about some vague energy crisis in the news and who have noticed that their gasoline and natural gas costs keep going up
- an easy, mindless interview opportunity for our corporate owned media who strive above all to maintain the social and political status quo—this also extends to the New York Times and NPR, which operates "inside the Beltway".
Each of the arguments (1) through (3) buttresses the others. It is instructive to contrast CERA with the well-respected energy consulting firm PFC Energy, "a trusted advisor to energy companies and governments across the globe for over twenty years. Founded in 1984, the firm has grown to over 100 professionals, with offices in Washington, Paris, Houston, London, Lausanne, Kuala Lumpur and Buenos Aires." Headed by J. Robinson West and with able staff like Roger Diwan, there is none of the extra baggage associated with Daniel Yergin and CERA.
Getting to Know Daniel Yergin
An excellent source for understanding the CERA Chairman is The Future of Oil, a radio interview by Tom Ashbrook of OnPoint (WBUR, Boston NPR) conducted on September 20th, 2005 after Katrina. Shortly thereafter, a critque by Clyde Simkins appeared in The Energy Bulletin entitled Open letter to Daniel Yergin on optimism and addressing Peak Oil seriously. Simkins raised 4 red flags after listening to the broadcast. Here are they are with some quotes and commentary (selected, written by this author).
- Yergin was not familiar with the Hirsch report (pdf) 6 months after it was published in February of 2005. Although there was some controvery over the disappearance of the report earlier that year, nonetheless Ashbrook was familiar with it whereas Yergin was not.
5:26: Ashbrook quotes from the Hirsch report and Yergin says "I wonder what, I'm not sure what report that is...".
16:15: Again, Ashbrook alludes to the report and Yergin responds "What is the report you're citing...?". Ashbrook tells him what it is.
- Yergin has an abiding faith in technology. To this it should be added that he also has faith in free markets to solve global energy problems.
2:50: This is "the fifth time that the world is about to run out of oil and each time technology, markets, have changed things."
8:08: "There's always an underestimation of technology. I mean, 15 years ago did you envision that everyone walking around the street would have a cell phone? I mean, just to use that as an example. 25 years ago the frontier for drilling was 600 feet. Now, it's 10,000 feet...."
9:50: [responding to Simmons' doubts about free markets] "It is, I think, what's the word, smug, to say, Oh, dismiss economics.... Two of the most important characters [in The Prize] are supply & demand. I really came away [after writing the book] with a respect for those forces....". Shortly after this, he talks about laptop computers.
- Yergin uses ready-made and fashioned arguments to calm the public down. See the point above. A substantial part of his argument concerns explaining away high oil prices by citing the geopolitical "risk premium", the demand shock from China and lack of investment in the late 1990's/early 2000's responsible for the current albeit temporary lack of spare capacity.
3:30: "It's not the risk under the ground [geology] but the risk above ground.... [and then he talks about Iran]"
He constantly appeals to the tar sands of Alberta (which are really oil sands) and other sources (growth in NGLs) as providing solutions to these problems in the near future. -
Yergin has faith in reserves growth over time.
33:00: "I think that what we find is that the definition of proven reserves keeps getting expanded by, ah, technology so that, ah, we said that the world had about, what was it, 600 billion barrels of reserves in the 1970's, now it's about 1.2 trillion barrels of reserves."
While Simkins and others, including this author, have taken Yergin to task, it seems much more accurate to view him as a symbolic leader and prophet with a Cornucopian vision. On such a view, his faith and dismissal of peak oil concerns make sense. It is useful to remember that The Prize is a geopolitical history of the oil business. Moreover, Yergin's background is in international relations, not petroleum geology or any other "hands on" discipline. Indeed, Yergin seems to have a thorough knowledge of above the ground issues. In addition, Yergin comes across as personable and approachable in this interview just as he has done in others.
In Conclusion...
Returning to Skrebowski's questions, here are some likely answers.
-
First, did CERA just start with the answer -- 110 million b/d in 2015 -- and then work backwards to fit?
Probably not. What Esser, Jackson and CERA staff did do is make the answer fit the Yergin vision. This meant using optimistic assumptions in all cases even when these assumptions strained credulity or distorted current realities (eg. the tar sands). Such actions are rarely deliberate. The CERA staff have internalized the values of the organization as defined by its symbolic leader. Otherwise, they would not be working there long.
- Second, on whose behalf or behest are they issuing this nonsense?
CERA is issuing this "nonsense" for no one in particular. These reports are meant for IHS Energy's paying customers. As Khaos3 told me in personal communication, "[CERA is] all about marketing a product and establishing a niche for consulting."
Plainly, if you wish to be a mainstream business and you further assert that the future does not look bright, you are sending a contradictory message—CERA is the elite upholder of the status quo regarding energy issues but the status quo no longer holds. Thus, it is necessary for CERA to bash those concerned about peak oil.
Half full or Half Empty?
For the Cornucopian, the answer is half full and being ever replenished. There are no limits to growth.
Oh well..
I love his comment "This is the fifth time we are running out of oil"
Coincidentally this is the 5th consecutive year he has got the projected price of oil wrong.
Is there someone who can go over each of these 5 times and explain why it might actually be differentths time.
http://www.h-net.org/~business/bhcweb/publications/BEHprint/v022n2/p0036-p0066.pdf#search=%22oil%20r unning%20out%201890%22
This may be the first 3:
The fountainhead of the modern American conservation movement, George Perkins Marsh...estalished major foci and themes, including alarm at the exhaustion of natural resources...The first critics to direct Marsh's concepts towards petroleum and say that America would run out
of oil were Pennsylvania geologists. From 1883 onward, J. Peter Lesley and John F. Carll warned that producers were depleting Pennsylvania oil fields so rapidly that the reserves would exhaust in a generation, and there was "no reasonable ground" to expect large new discoveries.
Thus, in 1908, George Otis Smith...assigned David T. Day...to report on petroleum reserves for the National Conservation Commission...Day offered an alarming view of American petroleum reserves...he concluded that the United States had between 10 and 24.5 billion barrels of oil
left, inclining to 15 billion barrels as the likeliest fiture...he argued that if production continued to increase as it had in the past, oilmen would exhaust national reserves by 1935...Few conservationist perspectives on petroleum have ever received as much attention and
repetition as Day's. For the better part of the next two decades, the USGS repeated his alarm in the petroleum section of its annual survey of mineral resources...After the USGS began to spread the alarm, the newly created Bureau of Mines, headed by former USGS employee Joseph Austin Holmes, joined its campaign by warning that the nation was wasting natural gas.
In December 1924, Calvin Coolidge created a Federal Oil Conservation Board (FOCB), appointed the secretaries of the Interior, War, Navy, and Commerce to it, and asked the board to answer such questions as whether there was an "inexhaustible supply" of petroleum in the United States; whether industry and government were "squandering" natural resourcs; and whether petroleum consumption and production could be cut back without disrupting the economy...The preseident's questions reflected two decades of conservationist discourse...They also implied what many critics of the petroleum industry charged outright; that the American petroleum industry had managed a vital natural resource irresponsibly and that it was time for government
to do something about it.
Count the 1970s as #4 and today as #5.
"In all the oil field booms that I've chased and followed there's one thing that's true of almost all of the oil fields, especially the ones that broke out on the West Texas plains. An oil boom is a thing that comes, and it lasts for a little while, and then it dies down again."
-- Woody Guthrie, 1940 radio interview
cheers
These Press Wars for Public Opinion remind me of the classic "debates" between Biblical Creationism vs Evolution with the clownish Yergin (mis)FigureHead playing the roll of Henry Morris or Duane Gish, and their Disciples playing the role of the fundamentalist christians.
Deliberate half-truths and strawmen arguments are easily passed on to the ignorant press which repeats the same baseless B.S. to the equally ignorant public. This keeps the gullible masses calm and docile like a Herd of Cows (apologies to the Bovine - no insult intended).
CERA is to Oil and Energy what the "Creation Science Institute" is the evolution - a FAITH-BASED answer to science which repeatedly gets away with passing off misinformation spouted by FigureHeads with fancy initials behind their names to give the impression of credibility to their repeatedly discredited Dogma.
And like the Biblical Creationists they do well with an uniformed public but would be shredded for their sophistry in scientific circles.
Christian Creationists are annoying and mildly entertaining, but are "Mostly Harmless" as the HitchHiker's Guide to the Galaxy would say. The Econo-Creationists on the other hand, are downright dangerous wiht their gross mis-representations of our immediate and very profound energy crisis.
Once again a mindless, gutter religion tends to win the hearts and minds of the gullible and ignorant while scientific realities are ignored because they are inconvenient or even discomforting.
Digital Rules
Capitalism's Amazing Resilience
Rich Karlgaard (Forbes Magazine), 11.01.04
Excerpts:
Where will oil prices be a year from now (now being 11/1/04)--$75 a barrel? $100?
Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil. He is a founder and the chairman of Cambridge Energy Research Associates, a consultancy that has 230 employees, with offices worldwide. He is also a recipient of the United States Energy Award and a member of the Secretary of Energy's Advisory Board. A former Harvard professor, Yergin is best known for his Pulitzer Prize-winning book on oil, The Prize: The Epic Quest for Oil, Money and Power.
Yergin's prediction of cheaper oil prices is noteworthy because he doesn't dispute any of the alarming facts cited in my opening paragraph. Not that he would. The facts came straight from Yergin's own mouth at the recent Forbes Global CEO Conference in Hong Kong. I jotted down Yergin's comments while listening to him speak at a dinner. Then he gave a formal speech the next morning and, fueled this time by highly caffeinated tea, I again took notes, just to be sure. Yergin is pretty clear about his predictions. He says oil demand will rise, yet prices will drop. How can this be?
Answer: capitalism's amazing resiliency. Oil prices rise--oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space. As Yergin reminds us, oil output is 60% higher today than it was in the 1970s. Not many sages from the 1970s would have bet their reputations on this development. The opposite sentiment prevailed back then; experts said the planet was running out of oil. Wrong.
Yergin says he's always asked when oil will run out for good. He shrugs. He's willing to say the world will need 40% more oil in 2025. Hard work and technology probably will find a way to meet the demand.
I did not mention "Daniel Yergin Day" or wrong predictions because I considered that all to be well-trodden ground.
Dave
hmmm you mentioned "something could happen soon like... August" if my memory serves me correctly, a few months ago....Alaska? per chance?
any other "something could happen soon"'s.:)
oh the anticipation to hear from one of the Highest Witches in their Order of the Deranged Psychopaths.
20% growth isn't even reassuring. That's 6 years, meaning (with compounding) less than 3% growth a year. The global economy is growing over 3% a year, so we're told. That means in 2010 supplies will still be as tight as they are now.
Apparently CERA also relies on people's inability to read statistics.
I hope no one tells Matt Simmons--he seems to be making money quite nicely and isn't exactly peddling feel-good fantasies.
The difference, I believe, lays in the nature of the two businesses. Simmons' company (an investment bank) have been financing the oil business for a very long time and continue to do so. On the other hand, CERA is a consulting firm making projections. They are not handing out money. They are handing out text and others are paying them. There's a big difference between the two cases.
Also, we must consider that it has taken considerable hutzpah for Simmons to take the position he has. This has not hurt his business no doubt because -- Lou, as an economist you know better than me -- a loan is a loan especially if the check doesn't bounce.
best --
In a world of digital watches, what does it mean to describe something as clockwise or counter-clockwise?
I was in the environmental field, which was somewhat tangential to their main line of practice. But one thing I quickly learned is that quite often a large corporate or governmental client does not hire a pretigious consulting firm to acquire facts or to learn the truth. Rather, the sole purpose is often VALIDATION.
By that, I mean that the client often has an agenda (usually connected with internal politics) that he/she is trying to promote and seeks to obtain leverage and credibility by having that agenda validated by the consultant.
Of course, an experienced, savvy consultant knowns exactly how to play this game, and - surprise, surprise - he generally comes up with the conclusions that the client is looking for. The art in all this is to not outwardly lie or present false information, but rather to subtly spin the objective facts so as to come up with the desired conclusions. I have seen this at work time and time again, and if done artfully, one cannot detect the consultant's thumb on the scale.
The thing that should answer a lot of questions about what Yergin and CERA are all about is the simple fact that one of their big clients is none other than the Kingdom of Saudi Arabia. Need one say more?
This is an excellent point and should be considered as part of the general analysis. The reinforcing nature of the business/client relationship should never be discounted and has a great deal of importance in any consulting situation. Thank you for this comment.
Or, perhaps, the Virginia State Climatologist soliciting funding from power companies, which is unfortunately not a joke.
Many years ago, and very early in my career, I managed a polymerization department for an adhesive company. Prior to my taking over the group, the company had decided that sufficient polymers could not be produced using the existing equipment and planned a major addition for major dollars.
One day all the suits were there including the president. I told them it was money wasted and that I could produce more material than they could ever use (which I did - in fact, I ended up producing more than a similar plant that was 2 1/2 times larger).
Did Todd get a pat on the back and a raise since I had saved them millions of dollars? Hell, no. My management was pissed. My guess is that the preceived bottle neck of lack of polymer production was used as a rationale for an inefficiently managed plant...and I under cut it so they had no excuse.
Groupthink is very much alive and well today in the Pentagon and White House. It was strongly reinforced when the General who said we needed 500,000 troops to control Iraq was fired. Only retired officers will say the Emperor has a bare butt.
Yeah!
And the Thought Police gets you when you try to bust some sucker.
How doubleplusungood!
http://www.mscottpeck.com/index.html
Peck wrote a number of books, from "The Road Less Traveled" to "The People of the Lie" to "The Different Drum" and more. I think the latter two were better than the first, but that's just my opinion.
You are right about Grouptthink. Peck really nailed the nature of human evil with regard to US participation in Vietnam, and specifically (IIRC) was one of the military psychiatrists who evaluated My Lai.
Just google "m. scott peck and my lai massacre report" to get a wealth of quotes and information related to this.
Then think about the current US war in Iraq for a moment.
Here's one quote:
>>>
Once again we are confronted with our all-too-human laziness and narcissism. Basically, it was just too much trouble. We all had our lives to lead--doing our day-to-day jobs, buying new cars, painting our houses, sending our kids to college. As the majority of members of any group are content to let the leadership be exercised by the few, so as a citizenry we were content to let the government "do its thing." It was Johnson's job to lead, ours to follow. The citizenry was simply too lethargic to become aroused. Besides, we shared with Johnson his enormous large-as-Texas narcissism. Surely our national attitudes and policies couldn't be wrong. Surely our government had to know what it was doing; after all, we'd elected them, hadn't we? And surely they had to be good and honest men, for they were products of our wonderful democratic system, which certainly couldn't go seriously awry. And surely whatever type of regime our rulers and experts and government specialists thought was right for Vietnam must be right, for weren't we the greatest of nations and the leader of the free world?
By allowing ourselves to be easily and blatantly defrauded, we as a whole people participated in the evil of the Johnson administration. The evil--the years of lying and manipulation--of the Johnson administration was directly conducive to the whole atmosphere of lying and manipulation and evil that pervaded our presence in Vietnam during those years. It was in this atmosphere that MyLai occurred in March 1968. Task Force Barker was hardly even aware that it had run amok that day, but, then, America was not significantly aware either in early 1968 that it too had almost unredeemably lost its bearings.
<<<
And another:
>>>
The research we proposed was rejected by the General Staff of the Army, reportedly on the grounds that it could not be kept secret and might prove embarrassing to the administration and that "further embarrassment was not desirable at that time."
<<<
Again, think about our current military engagement in Iraq and the misguided GITMO "War on Terror" brutality. We're all too busy leading our lives of relative comfort, while it is the President's job to lead, and our job to follow, and congress has the job of oversight, and the courts do their job of interpreting the law and overseeing the secret wiretapping and secret trials and.....any problems are just caused by "a few bad apples."
Sorry -- the reference to Peck's superb work on the my lai incident triggered a rant, but there may be something worth reflecting upon here. Peck's "The People of the Lie" is certainly relevant today.
If we really wish to track oil production then we should stick to oil production, crude oil production, not alcohol or bottled gas.
At any rate the peak, so far, is December 05. I am of the opinion that this date will be the peak when it is finally established. But if you add alcohol, palm oil and bottled gas, I have no idea when it was, or might be. After all, the production of bottled gas seems to be growing by leaps and bounds lately.