Introduction to The Prize: The Epic Quest for Oil, Money, and Power, Daniel Yergin, 1990

I started reading The Prize by Daniel Yergin, which is a canonical account of the history of oil in global geopolitics and economics. To explain why it might be worth better understanding oil, pause and consider what oil really is. In a very real way, future anthropologists will view this era as the Oil Age in exactly the way we look back on the Stone, Bronze, and Iron Ages. The realities of our personal lives, down to the contours of our simplest daily decisions, and our collective national prosperity, are almost wholly determined by the availability of oil and its products. Our gas powered car or plastic sneakers define us and our lives as much as or more than a stone-tipped spear defined our Stone Age ancestors.

Cracking open this book in 2021 presents a fascinating dynamic since The Prize was released in the early 1990s. A transformative thirty years have elapsed, and while the earlier history up to 1990 recounted in the book is still the same history today, the author’s then-current perspectives and historiography is now history itself. As such, while I intend to write a reflection of the work as a whole once I have finished it, immediately after reading the introductory section I felt compelled to compare and contrast this changed reality for oil, as I understand it going into the book, between the early 1990s and the 2020s.

The introduction of the Prize highlighted three overall themes that underlie the story of oil and indicate its importance to the world. The first is “the rise and development of capitalism and modern business”. The second is “oil as a commodity [is] intimately intertwined with national strategies and global politics and power.” The third is that “the history of oil illuminates how ours has become a ‘Hydrocarbon Society.’” Let’s look at each of these three in turn.

Before we dive into these themes, we cannot avoid the elephant in the room. In the early 1990s, mainstream concerns around environmental and climate impacts of oil warranted a single sentence in the introduction to a work that won the Pulitzer Prize. The author explains that, until recently (the 1990s), the expansion of the use of (or dependence on) oil was extolled as a virtuous path towards modernity. But worries were growing about the risk of environmental degradation as a result of the burning of fossil fuels, leading to a movement to curtail their use. These risks included “the specter of climate change.” This is obviously a far-cry from the now-current cries about climate crises and for net-zero that have mainstream gravity.

A book about oil written in 2021 would include a fourth theme (which would likely be listed first) about oil and its relationship to climate change. Such a theme would delve into the history of the climate’s changes over the last few centuries as well as forecasts about the hoped-for decline of oil and the difficulties of that transition to alternate sources of energy. 

As will be discussed more in response to the third theme, the limited reference to climate and environmental pushback in the book were included in the third theme about “hydrocarbon society.” In short, as in 1990, in 2021 most people are unwilling to give up their Oil Age lifestyles despite its long-term but rapidly approaching costs.

The first theme in The Prize explains how oil was the “world's biggest and most pervasive business” in 1990. Yergin posits that the business of oil is inseparable from global capitalism. Oil was and is almost equivalent to money. Oil’s production brought immense wealth to those that controlled it, whether in the Middle East, Russia, Texas, or elsewhere. Oil production firms like Standard Oil are some of the earliest and defining examples of the type of large-scale corporations that define today’s capitalism. Similarly to the widely-discussed NYTimes’ 1619 Project and its assessment for the business of slavery, the author claims that the practices of the business of oil are the derivation-point of the practices all corporate-captialism and a cornerstone of its wealth.

Yergin does note that success in the twenty-first century will likely come from the computer chip as much as from the oil barrel. This has in fact largely occurred. In 2021 when it comes to corporate market cap and cultural salience, Big Tech has displaced Big Oil. Even Big Finance could be said to have done the same. In a symbolic shift, ExxonMobil was removed from the Dow Jones in 2020 (Chevron remains in the list). It seems to be the case that the continued economic prosperity for the United States relies on software engineering, increasing automation through AI, and generally in technology. It remains to be seen how well the developed world and the developing world each move to non-fossil fuel sources of energy. Despite the potential for these newer computational industries as sources of wealth that at first may seem independent of oil, it is not the case. Computation requires immense energy resources which remain largely derived from oil and natural gas. Blockchain proof of work is widely panned for its immense energy expenditure. Of course, the 2020 pandemic also showed a fascinating episode of negative oil prices, but that is merely a sideshow for the economic role oil retains.

The second theme was oil’s role in global geopolitics. Here we diverge somewhat between 1990 and 2021. Oil retains a preeminent role in geopolitical strategy despite an accelerating trend towards electrification and renewables. Rare earth metals necessary in batteries and electrical components may supplant oil as the most critical natural resources, but oil remains and will remain for some decades to come as one of the principal critical sources of energy. It’s importance for plastics and other chemicals will also remain despite net-zero goals. Notably, while oil wealth raised several previously pre-industrial Middle Eastern nations to the global stage as part of the “third world” in the Cold War, many of the rare earth metals are most prevalent in China. With something like a new Cold War brewing between the United States and China, this accident of mineral abundance will be a new pivotal element in great power strategies. Imagine the position of the US if the Soviet Union had controlled a huge portion of the world’s oil resources.

Something that the introduction does not mention is the fact that much oil financing occurs in dollars. Since the publication of The Prize, the Federal Reserve has conducted monetary policy such as quantitative easing in response to two major recession crises with minimal impacts to American inflation. The U.S. government has sustained high debt loads, conducted loose monetary and fiscal policies, and repeatedly imposed international economic sanctions by taking advantage of the dollar as the world’s reserve currency. Oil’s marriage to the dollar has certainly helped this. Additionally, a few details of the global oil situation have shifted. While in the 1990s, the United States was in a reliant position as a huge net-importer of oil, in the 2020s after the fracking revolution the United States has recently been the world’s largest oil producing nation and is closer to energy independence than it has been in decades, but the nation must work diligently to avoid reliance on foreign sources of post-oil critical resources. 

The third theme was the fact that we live in the Oil Age. This theme is as critical today as ever. What this really means is that our daily lifestyles and our expectations for material wealth and consumption require oil as an energy resource and a production raw material. Furthermore, citizens of China, India, or elsewhere of the developing world expect the right to pursue the levels of wealth and consumption that those in the developed Western world could enjoy. In the move to renewables and post-oil economies, there is no discussion of reducing energy requirements and expenditures. We are not reducing personal car use in favor of efficient public transit, but rather are moving from gasoline to battery which is far from a panacea for society’s environmental impacts. Suburbanization is stronger than ever. 

The lessons of The Prize will remain as edifying as ever even if oil is wholly replaced with solar or nuclear as the energy of the world. For The Prize is really an explanation of the story of our civilization’s drive to satiate its hunger for energy - the competition and innovation included in that story. What sets the oil age apart from prior ages, those defined by different primary sources of energy, is the fact that the total available energy resources for humanity expanded by orders of magnitude. It is due to that leap in energy availability that overall human wealth and health reached new heights since the start of the industrial age and then more recently moving into the information age. Before oil and after it, humans play these great games, suffer the same vices, display the same virtues.