Harry Wu, journalist for Southern Finance Omnimedia Corp (SFC)
On the eve of World War I, First Lord of the Admiralty Winston Churchill made a historic decision: to shift the power source of the British navy's ships from coal to oil. He intended to make the fleet faster than its German counterpart. But the switch also meant that the Royal Navy would rely not on coal from Wales but on insecure oil supplies from what was then Persia. Energy security thus became a question of national strategy.
What was Churchill's answer? "Safety and certainty in oil," he said, "lie in variety and variety alone."
This is also the favorite sentence of Daniel Yergin, Vice Chairman of S&P Global, in The Prize: The Epic Quest for Oil, Money & Power. With the book, Yergin won the Pulitzer Prize as a highly respected authority on energy, international politics and economics.
Yergin said that he recently reread The Prize and is writing a new epilogue in an interview with SFC. What he wants to explore is what lessons are worth remembering? He hopes to focus on energy security, supply and demand forces, and the role of innovation.
"One of the fundamental ways to gain resilience in the energy system is to diversify energy sources. This was a message in 1912, and it is a message in 2025." More than a century has passed, but in Yergin's eyes, the laws that keep the world running are still as solid as a rock.
Blending the old and the new
Throughout human history, energy transition has never been an either-or situation.
The first major energy transition in modern times was the shift from wood to coal. Although coal was used for heating in Britain in the Middle Ages, especially when the price of wood soared due to cutting down of forests, the decisive moment of energy transition occurred in a furnace in the English village of Coalbrookdale in January 1709. That was when Abraham Darby, a metal worker who specialized in cast iron pots, figured out that coal was a more effective means of iron production than wood. “There are many who doubt me foolhardy,” Darby lamented.
“Events would prove Darby right, but just not right away,” Yergin said. “It took most of the rest of that century before the steam engine provided the takeoff for the Industrial Revolution. And despite the 19th century being known as the century of coal, it was not until the beginning of the 20th century — two centuries after Darby’s breakthrough — that coal overtook wood as the world’s number one energy source.”
The trajectory of oil is basically similar. Oil was discovered in western Pennsylvania in 1859, and it was not until the 1960s that oil replaced coal as the world's largest energy source.
“In 2024, the world used three times as much coal as it did in the 1960s. This makes a basic point about the energy transition: it is also energy addition,” Yergin added. “In 2024, the world used more wind and solar energy than ever before. But it also used more oil and coal than ever before. ”
Technological progress is crucial. In Yergin's view, the world needs new competitive low-emission and zero-emission technologies, and needs to make technological and commercial progress in areas such as carbon capture, hydrogen, geothermal, large-scale electricity storage and biofuels.
Headwinds
Under the headwinds of globalization, the global energy landscape is also facing the challenge of fragmentation.
In the book The Commanding Heights: The Battle for the World Economy, Yergin explores the process of globalization. He said that the world once moved towards globalization; borders between countries gradually disappeared; trade rose; and supply chains grew rapidly. “Today, although the world is still globalized, it has become more fragmented, and issues such as national identity and politics are affecting the global supply chain.”
As one of the most important resources in the world, oil has huge economic, political and social significance. However, dependence on oil also makes countries vulnerable to multiple factors, such as geopolitical conflicts, environmental disasters, and market price fluctuations.
Balancing energy transition and energy security is crucial.
Yergin said that in the past few years, the consequences of some "disorderly" energy transition have already appeared: price shocks, energy shortages, energy interruptions, supply competition, conflicts and more. “Energy transition needs to be orderly to avoid falling into a cycle of crisis.”
Under the impact of soaring energy prices, Europe has suffered deindustrialization challenges and frequent power outages in many countries. If Europe wants to restore its competitiveness, it needs to solve energy problems.
The challenges facing developing countries are bigger. “For many developing countries, oil and gas are important parts of their economic strategy, but it is not easy to give up cheap and safe coal. Many people around the world do not even have access to modern energy, but use wood and waste for indoor heating and cooking, which brings huge costs to health,” Yergin said.
Rise to the challenge
Although energy transition is challenging, it is the only path.
Yergin said that the scale of decarbonizing a global economy of more than $110 trillion is incredible. As 2050 approaches, trying to change such a "monster" and achieve net zero emissions is full of challenges.
Cost is also a constraint. Replacing the existing energy system would require a vast outlay of capital for the infrastructure of a new system. The economic analysis that underpinned the 2024 UN climate conference in Baku, Azerbaijan, posited that the global investment required to achieve net-zero by 2050 would be $6.5 trillion per year between now and 2030, reaching as much as $8 trillion by 2035. That would translate into about 5% of global GDP devoted to achieving the 2050 goals.
In the era of AI, the demand for energy may reach a new level. How will it affect the energy industry? Yergin said “there's a real rush now for data centers to ensure the electric power, and one of the things that we're very focused on is what's required for the data centers. So we're doing work focused on what we call the metal of electrification and ensure that there will be sufficient copper to support the whole data center revolution.”
Amid many shocks and turmoil, energy transition faces headwinds. “If energy transition can balance economic growth and energy security, and solve the energy access problem for billions of people in developing countries, then energy transition is more likely to succeed,” Yergin said.
Increasingly frequent extreme weather events have sounded the alarm. Yergin stressed that energy transition is vital to human civilization. “The goal of reducing emissions by transforming the world's energy system from traditional energy to renewable and alternative energy sources, such as wind, solar, biofuels, batteries, electric vehicles and green hydrogen, is of great significance. ”
“Today’s energy transition is meant to fundamentally differ from all preceding energy transitions — to be transformative rather than additive,” he added. “However, for the most part, worldwide so far, it is proving to be, as in the past, addition, not replacement.”
Looking ahead, Yergin said “the wide range of challenges facing the transition means that it will not unfold in a linear way. Instead, it will continue as it already is — multidimensional, developing at varying rates in different regions with different mixes of technologies and different priorities. It also makes clear that continuing investment in conventional energy will be a necessary part of the energy transition.”
