Fighting The Last War?

What is the battle for oil really about?

I tend to think of little Free Libraries as the cat distribution system of the literary world; they give me what I need when I need it. I was away this week on a birthday trip for a friend and the bus/train rides up and back gave me a chance to finish off The New Map by Daniel Yergin, which I picked up at a free library a few weeks ago when my husband and I did a round of drop-offs and pick-ups around our area. It was updated in 2021 before the latest mess we find ourselves in but there are probably not many better people to explain energy, oil, and gas than Yergin, who is one of the best authorities on energy and geopolitics.

I am guilty of not paying too much attention to energy. I do own some energy stocks. The first stock I ever picked to own as a young teenager was Exxon (I liked the tiger logo). My most recent energy investment was Schneider Electric, mostly because I like their approach to energy management in the age of AI. I know some excellent energy investors from my time at the Motley Fool (shout out to Jason Hall and Tyler Crowe) who taught me about things like contango and backwardation. But I mostly don’t understand the energy world much.

Yergin’s The New Map is a good explainer book for a semi-educated newbie. Not for investing but for seeing the world through an energy lens. The book is structured in sections (U.S., China, Russia, and the Middle East) showing how each region is handling energy production and demand. He does an excellent job breaking down why the shale revolution was such a breakthrough for the U.S. and how China is leapfrogging everyone in battery and solar cell production. As much as alternatives are gaining ground, we still live in an oil and gas world.

The book didn’t necessarily explain why we are in the current war, but it does do an excellent job showing the inherent conflicts in the Middle East and how oil is both what draws countries together and tears them apart. In my lifetime, peace in the Middle East has been drawn and redrawn so many times. Borders and conflicts change but the detente never lasts. In a world not dominated by energy anxiety, other nations would likely decide to turn a blind eye. Yergin has been making the rounds lately, talking about the current war and what it means.

Humans are a funny bunch. Incapable of living in the present for the most part, we use the past to predict the future. Yergin spends much of the last part of the book discussing climate change, rare minerals, and the growing concerns around the South China Sea. He points the reader in a variety of new places to have anxiety as well as reasons for hope, but he is very clear that oil demand isn’t disappearing. Most of the alternatives we have currently take a long time to bring online. We have spent the last century creating an infrastructure that runs on oil and gas. I drove my friend’s Tesla around this week and experienced firsthand the difficulty of finding charging stations and the cumbersome need to wait for a full charge. However, that’s more of an infrastructure/technology program that has gotten easier and faster over the last few years.

Yergin’s book isn’t about China per se but it is about the ways that China faces the future. China over the last decade, hasn’t been getting there first when it comes to technology, but it is able to mobilize more quickly and turn an innovation into an evolution. We may already be chasing China, we just aren’t realizing it yet and we are too ego-driven to learn from other nations. They are making mistakes and their economy has its very weak areas (real estate) but when we stop learning from others, our blind spots grow, as people and as nations.

The real lesson from Yergin’s book for me is that there is always a new map, not just nations, but resource and energy maps. This is true in investing but also in life. When we hold onto the last map or fight the last war we are closing off the new possibilities before they arrive. However, new maps don’t spring into existence fully formed; we are always one foot in the old, one foot in the new. Right now, I’m feeling this more than ever. This current uncertainty on a personal level and a national level drives a certain level of anxiety. Everyone I talk to feels like they are in a tippy canoe and aren’t sure whether to stop paddling or paddle faster. There are no easy answers. The tides are uncertain around us; all we can do is link arms and struggle forward.