The QUEST: Energy, Security, and the Remaking of the Modern World.

AuthorJoutz, Fred

The QUEST: Energy, Security, and the Remaking of the Modern World, by DANIEL YERGIN (New York, NY: The Penguin Press, 2011), 804 pages, ISBN 978-1-59420-283-4.

The Quest is an update to The Prize, the Epic Quest for Oil, Money, and Power. The former traced the role of key figures in the domestic markets and geopolitics of oil from the 1860s to 1990. Yergin explored the characteristics and goals of the individuals, the companies, and the governments in obtaining, profiting, and consuming oil. The update looks at the 21 years since then. In addition, he broadens the scope to look at the energy spectrum from a security and environmental perspective. In effect the story is about the transition of global energy from the perspective of industrialized countries to emerging economies and the shift from barrels of oil and their equivalent to megawatts. He closes with thoughts about the transition from fossil fuels.

Professional energy economists might put Yergin down as a historian/journalist and not waste their time reading The Quest. They do so at their peril. His discussion is not at the level of evaluating behavior and prices at the margins or comparing the alternative theories. These are not his comparative advantage. But he does understand how markets and institutions interact and relative prices affect energy choices and technology change. The reason for reading this book is to understand the institutional framework, historical and cultural traditions, and motivations of the key individuals and or "companies." Yergin's access to leaders in business, governments, and academics is unparalleled and he takes advantage of this and his skills in telling the story.

The analysis of energy markets requires adapting these kinds of insights into theory and empirical models. Blindly imposing applied microeconomic or macroeconomic theory to the data will lead to poor models and false inference. The profession is not well served and policy-makers and analysts are not going to be willing to listen to energy economists who are only academically literate.

Yergin blends three themes into six sections of the book. The first theme relates to how access and affordability of energy is critical to maintaining economic growth in standards of living in the developed world along with development and poverty alleviation in emerging economies. The second theme is focused on the importance of how vulnerable economies are to disruptions of energy supply and infrastructure to geo-political actions and natural disasters. The third theme contains a discussion of the role and interaction of energy production and consumption choices with environmental outcomes, climate change, energy policy, and the role of technological change.

Within the themes are the following six sections. Section one focuses on oil and picks up where The Prize left off. He begins by describing the developments on the non-OPEC supply side with the resurgence of Russia and Central Asia. He describes how the concept of "Super majors" has changed to include NOCs and the evolution of Petro-States. The section ends with the growth and importance of China (and India) in the global market on the demand and supply side.

Two popular topics in the media and public debate: are we running out of oil and will consumers be cut off from oil. Yergin addresses these issues in section two expanding the debate properly to natural gas as well...

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