DUBAI -- The coronavirus pandemic is accelerating the ongoing global energy transition. Many people are working from home and companies and governments are decarbonizing their economies. What country, therefore, stands to best negotiate this massive shift to a new era?
Renowned expert Daniel Yergin has a clear answer. "China is poised to be the winner," he tells Nikkei Asia in a video interview.
Yergin, vice chairman of IHS Markit, won the Pulitzer Prize in 1992 for "The Prize: The Epic Quest for Oil, Money, and Power."
In his new book released in September, "The New Map: Energy, Climate, and the Clash of Nations," he considers the "fragmentation of globalization."
"Trade barriers were going down, but now geopolitics have really stepped into global trade. We are just in the beginning, [and] we are going to see more of these geopolitics dictating global trade," Yergin told Nikkei.
Asked how the pandemic has influenced energy demand, he said it "has accelerated digitalization. Seven years of digitalization have been compressed into seven months. There will be a big question about where people will work."
Digitalization, triggered by the coronavirus, has changed how energy is consumed in many countries. Given that China imports 70% of its crude oil, declining mobility and the plunge in oil consumption will benefit the country since its energy imports will decrease. "China is poised to be a winner and Russian and Middle East oil exporters the big losers," Yergin said.
The country already has a robust supply chain for solar panels and lithium-ion batteries, giving it dominance in the renewable energy supply chain, while European countries have complained to the World Trade Organization that China is not complying with international rules.
But with decarbonization proceeding in numerous countries, none are in a better position. "China will be a winner and beneficiary in the new energy economy," Yergin said.
With the U.S. and China are at loggerheads over a host of global issues, he stresses China's importance for U.S. allies as well. According to Yergin, a Latin American leader recently told him of not wanting to get "caught up" between the two powers.
Most of the oil producing 'petrostates' have not been able to diversify their economies. In his new book, Yergin writes how the United Arab Emirates did manage to enhance the non-oil sector of its economy over the past two decades. He emphasized, however, that it was easier for a small economy like the UAE to accomplish that.
On the other hand, larger oil-rich countries face a more difficult challenge. Yergin said that a senior policy adviser in Saudi Arabia told him that "[if Saudi Arabia] accomplishes half of [its] diversification goals, that would be fantastic."
Yergin sees oil demand peaking " by the mid-2030s," but also says that in 2050 "the world will still be using a lot of oil and natural gas." The reason is the 1.4 billion cars on global roads today which, he said, will increase to about 2 billion by 2050.
Around 60% to 80% of new cars sold in 2050 will be powered by electricity or hydrogen, therefore, about one-third of cars will be electric or hydrogen vehicles. But the remaining two-thirds will still be running on oil.
Furthermore, petrochemical products such as plastics will still be in use. "The COVID-19 crisis has demonstrated the importance of plastics," Yergin said.
He predicts that as solar and wind power grow rapidly, natural gas and oil will remain important in the global energy system during this century. Yergin's vision is that "the world will have a mixed energy system with carbon capture technology." But he also urges caution. "It would be unwise to generalize the future when we are still in this unprecedented crisis," he said.
When it comes to the U.S. presidential election, investors are wary of Democratic Party candidate Joe Biden since some members of his party are calling for a fracking ban and ending drilling for shale oil and gas so as to protect the environment.
But, Yergin said, "Biden is a realist and understands how shale has impacted the U.S. economy." And he added: "The shale revolution has given the U.S. a new degree of power and influence that it didn't have before."
Additional reporting by Nesreen Bakheit.
