Daniel Yergin, Pulitzer Prize–winning author of The Prize and The New Map, discusses the history of oil, its geopolitical significance, and the future of energy. He explains how oil has shaped the modern world, why certain personalities dominate the industry, how energy transitions actually unfold, and what AI and electrification mean for the next era of energy demand.
The origins and early dynamics of the oil industry
The oil industry began in 1859 with Colonel Drake’s well in Pennsylvania and scaled with extraordinary speed: within a decade, boom towns, busts, and Standard Oil had emerged, pumping millions of barrels annually—a deployment pace comparable to the internet or the early movie industry.
John D. Rockefeller built his fortune not on gasoline but on kererosene lighting, displacing candles and whale oil. Gasoline was originally a waste product, selling for about three cents a gallon.
Rockefeller focused on refining, not drilling or land ownership, because refining was the bottleneck that controlled market access. He drove competitors out or absorbed them, eventually controlling roughly 90% of the US refining business.
Standard Oil’s management was notable for its rigorous discipline and attention to detail—tracking costs to two decimal points without computers—combined with boldness in scaling and integrating operations.
The 1911 antitrust breakup of Standard Oil, while the most famous antitrust case in history, arguably strengthened the industry by creating independent companies that unlocked more room for entrepreneurship and innovation. Ironically, Rockefeller became three times richer as a shareholder of the successor companies.
Rockefeller recruited former competitors he respected—“hardy” rivals who chose to join rather than fight—and was widely hated in his era, epitomized by Ida Tarbell’s muckraking account of Standard Oil as a company that “always played with loaded dice.”
Oil as a strategic commodity in the World Wars
World War I established oil as a strategic commodity. Churchill, as First Lord of the Admiralty, converted the Royal Navy from coal to oil despite warnings about dependence on Persian supplies, famously calling oil “the prize of the venture” (the origin of Yergin’s book title). The war saw a rapid technological shift from cavalry to tanks, trucks, and airplanes. A British foreign secretary later said the Allies “floated to victory on a sea of oil.”
World War II was not solely an oil war, but oil was decisive within it: Hitler invaded Russia partly to reach Baku’s oil fields; Japan attacked Pearl Harbor driven by oil needs after the US embargo; Rommel ran out of fuel in North Africa; Patton’s advance was constrained by fuel shortages; and kamikaze tactics were partly motivated by fuel scarcity. Six out of seven barrels used by the Allies came from the United States.
After WWI, governments recognized oil’s strategic importance and began supporting companies in securing Middle Eastern supplies. After WWII, the US remained dominant, but surging domestic demand from highways, suburbs, and economic growth caused the US to become a net oil importer by the late 1940s.
The Middle East, OPEC, and the obsolescing bargain
Post-WWII, geologist Everette DeGolyer identified the Middle East as the new center of gravity for world oil. Major discoveries in Kuwait and Saudi Arabia (1938) were developed after the war.
Western oil companies initially negotiated highly favorable deals with exporting countries, but over two decades the terms shifted—from company-favorable concessions to 50/50 splits to majority host-country control—through a process economist Raymond Vernon called the “obsolescing bargain.” Countries could always threaten nationalization, and over time they gained the technical capacity to run operations themselves.
OPEC was formed in 1960. The 1973 oil crisis was triggered by an Arab embargo tied to the Arab-Israeli conflict. Global supply fell only about 15%, but panic, price controls, and allocation systems amplified the disruption into the deepest recession since the Great Depression. The crisis demonstrated how dependent industrialized economies had become on oil.
Yergin emphasizes that the two most important “characters” in oil history are Supply and Demand: OPEC’s high prices in the 1970s incentivized new production and efficiency gains, ultimately undercutting OPEC’s own price and leading to the 1986 price collapse.
Among oil-rich states, the UAE (Abu Dhabi) used its revenues most effectively, building a roughly trillion-dollar sovereign wealth fund and diversifying so that more than half its GDP is no longer oil. Saudi Arabia is now attempting a similar diversification. By contrast, the Soviet Union, Iran, and Iraq failed to prepare for price volatility.
The “resource curse” or Dutch disease—where resource wealth inflates the economy and undermines competitiveness—has plagued most oil states. Yergin advises new oil producers to sterilize revenues in sovereign wealth funds, invest in health and education, and convert financial capital into human capital.
Aramco stands out as a well-run nationalized company because it retained highly trained personnel (many with PhDs from top global universities) and maintained the operational culture of its Western predecessors.
The shale revolution and its geopolitical consequences
The US shale revolution, driven by George Mitchell’s 18-year persistence in developing fracking, transformed the world energy landscape. US oil production rose from 5 million barrels per day in 2008 to over 13.2 million, making the US energy independent—something once considered a joke.
The geopolitical impact has been enormous: US LNG exports to Europe after Russia’s invasion of Ukraine prevented Putin from using gas as a weapon to break the Western coalition. Japan now views US LNG exports as part of its own energy security architecture.
Putin himself recognized the threat as early as 2013, angrily denouncing shale at a conference—Yergin was present and asked the question that provoked the outburst. Putin feared both competition with Russian gas and the augmented geopolitical position of the US.
The frackers were so successful that they competed away their own profits; after 2017, financial markets shifted from rewarding growth to demanding returns on investment, and shale has matured into a more disciplined industry.
AI, electricity, and the new energy constraint
AI is creating a sudden, large new source of electricity demand. Data centers currently consume about 4% of US electricity; projections suggest this could reach 10% by 2030. A single AI campus may require a gigawatt—the output of a nuclear power plant.
US electricity demand had been nearly flat (growing 0.35% annually), but AI, electric vehicles, reshored manufacturing, and the energy transition are now driving projections of 2% or more annual growth.
This creates a potential constraint on economic activity: permitting delays (it can take 29 years to open a new mine in the US), supply chain bottlenecks (offshore wind cables ordered now won’t arrive until 2029–2030), and an aging workforce (seven years to train a lineman) all limit the ability to expand supply quickly.
Yergin notes that electricity is now a matter of energy security in the same way oil and gas have been.
The energy transition: complexity, minerals, and geopolitics
Yergin argues the current energy transition is fundamentally different from all previous ones. Past transitions (wood to coal, coal to oil) were energy additions—new sources supplemented old ones. The current transition aims to replace the existing system within roughly 25 years, which is unprecedented.
The transition is driven by policy and technology, not price. The Inflation Reduction Act (roughly $1 trillion) is as much about competing with China as about climate.
Renewables introduce new mineral intensity: an electric car uses 2.5 times more copper than a conventional car. Meeting 2050 climate goals would require copper supply to double by around 2035—a target Yergin considers highly uncertain given permitting timelines.
China dominates solar manufacturing, a position built on German feed-in tariffs that created initial demand. The US has responded with 100% tariffs on Chinese electric cars and 25% tariffs on Chinese batteries.
Oil companies are divided: European majors (Equinor, BP, Shell, Total) invest heavily in offshore wind, leveraging offshore oil skills; US majors generally say “we do molecules, not electrons,” though Exxon is entering lithium mining.
Wind and solar still face intermittency; in California, they provide 25% of generation but natural gas provides 43%. Storage and baseload remain unsolved at scale.
Yergin draws an analogy between early oil (used only for lighting, with a glut of kerosene) and current AI (used for chat and research): the question is what the industrial-scale application of AI will be—the equivalent of the automobile for oil.
Yergin’s approach to history and storytelling
Yergin sees himself as a storyteller first. He wrote The Prize over seven years (not the planned two) because the narrative kept expanding. He almost sees scenes like a movie when writing, which makes the material vivid.
He stresses contingency: things that seem inevitable in retrospect were not obvious at the time. Understanding why events happened—human agency, decisions, mistakes—is what narrative history adds beyond statistics.
He read the entire The Prize aloud to test whether every sentence “sings.” He started the book and a business simultaneously, writing nights and weekends, and used the book advance to capitalize the company.
If he were to recommend another subject for a definitive world history, he suggests the movie and entertainment business—an epic story with oversized personalities that has shaped global culture.
