Daniel Yergin, vice chairman of IHS Markit, is the Pulitzer-prize winning author of
The Prize and The Quest. He was the vice chairman of IHS and founded IHS CERA. Yergin, 71, is an authority on energy, international politics and economics. The winner of lifetime achievement award by the Prime Minister of India is in New Delhi for the second CERAWeek, an annual energy conference organised by IHS Markit. In an exclusive interview to CNBC-TV18, Yergin said that India is very important to the global energy market and that is why they are organising the conference in New Delhi. Below is the verbatim transcript of the interview. Congratulations first of all for the second year of CERAWeek, a lot has changed in the last one year, the prices, the global cues, industry dynamics etc. how would you put all of that in perspective?
I think, we have seen has changes in the oil market which are quite a dramatic. Today we have a very tight oil market and, of course, on top of that is the question of sanctions and so I think for this CERAWeek in India it could not be more timely in terms of what we were going to address because it is so important to what has happened to the Indian economy right now.
When it comes to India as you mentioned even the prices have been higher. We have seen the currency continue to slide 17 percent down for the Indian rupee in this year and that has made the imports really expensive for the Indian markets, as a consumer country where do you think India stands right now and what should really we be doing?
I think India is in a difficult position in oil now because it imports 85 percent of its oil and with this slide in the rupee this is really driving up the cost and this as an energy is a very important factor in India’s economic growth.
This is a really hard issue, really serious and important issue that we are going to have the key players including the Saudi Oil Minister and the Secretary General of OPEC at our conference. I think it could not be more timely and every word that is spoken there will be significant for India.
With the crude oil prices at a four-year high, what is your sense, Iran exports continue to decline, we saw 1.6 million barrels in September. That has come down to 1.1 million in the previous week. Markets are anticipating that we could see some more crude being knocked off from Iran. What has been your sense about the Iran sanctions, the latest statement from the US about waivers, extension, etc.?
I think that this administration is determined to push down Iranian exports and wants to do it faster and greater volumes than under the Obama administration. I think the expectation should be that Iranian exports will be lower than they were last time, there were sanctions there. So that has come in at a time, it is just a few weeks away, and I think that nervousness, anticipation, uncertainty is very much on the oil price.
In some way, it seems to me when we look at the numbers that in physical terms the oil market is balanced, but right now it is emotionally unbalanced with the imminence of the sanctions combined with the continuing decline in production in Venezuela and uncertainty about other parts of the world. So it is a dramatic turnaround from where the oil market was even half a year ago.
The kind of statements that we have seen come in from Saudi Arabia and Russia about increasing production, and assuring that they will be able to fill in the gap, do you actually see that happening on the quality and the quantity front?
I think they are going to do their best. I just came back from Moscow, I was there with the Saudi and the Russian ministers, and they are very concerned about the stability in the oil market, not seeing these prices continue to go up. They are quite aware of the impact of high oil prices with weakening currencies and countries like India. They do not see that as good for the world economy, good for them as well as not good for countries like India.
So, their message is that they will do their best to get the supplies there, but they do say that there is a need to see the demand. However, what is happening now is supply chains are being changed in anticipation of sanctions, for instance, South Korea completely stopped in August buying Iranian oil which meant that it had to go to elsewhere for oil. So we are in a very jangly period right now.
What would you say what works best for India? I remember having the same conversation last year as well that India’s dependence only continues to grow from here. The crude oil volatility is something that we will perhaps have to learn to live with so what would you say the kind of progress that India perhaps is making are we in the right direct direction and is the pace faster enough?
Under Prime Minister Narendra Modi and the energy minister Dharmendra Pradhan, we have seen an effort to change the investment environment in India. For decades, India had a situation that did not encourage investments, so was losing out to other countries around the world. They were bringing new supplies on.
I think India needs to continue to make progress in attracting both domestic Indian investments and International investment and technology developed at resources to reduce its dependence. At the same time, it needs to be more efficient in how it uses its oil and its energy so you got to move on both of those fronts.
I should say by the way that we can see the degree of international participation in this CERAWeek forum indicates that International companies are much more interested in coming to India and invest in than they would have been 3-4 years ago. It doesn’t solve the immediate problem which is a real problem, but it does lay a stronger foundation for the future.
What is your sense really on the US making statements on exemptions and waivers on perhaps Iran sanction deal, would you see India in that sense in a sweet spot really?
There has been back and forth on waivers, no waivers. I think the US-India relationship is a very important relationship. It has evolved and developed over the last several years and there is a need to be realistic about India’s position.
On waivers in Washington and in the discussion between New Delhi and Washington will see over the next really several days. But some sense there will be waivers in circumstances like India would be positive for the market in terms of lessening the impact of high prices.
One question that almost everybody is asking and wants to know an answer about really is the crude oil prices going forward. What is your sense because international bankers, brokerages, oil merchants, all have come out with all sorts of reports putting crude from $70 per barrel on one side to $90 per barrel and even $100 per barrel on the higher side?
I think that really demonstrates, the wide range of estimates of prices over the next six months really demonstrates the uncertainty that exists. You could see prices in some circumstances continuing to go up depending upon how these sanctions apply, depending what happens elsewhere, depending with something that people don’t think maybe much about what happens with Venezuela’s oil production is declining so rapidly.
On the other hand, when we look at 2019, we do see more supply come into the market, from Russia, we see the United States bottlenecks that are kind of dampening down production growth being reduced and so we see a picture in 2019 where the supply picture looks better.
It is the next couple of months that are really dicey and uncertain period and why you are getting these very wide price estimates. Of course, you also have to remember, people forget price matters, and so if prices do go up, it is going to demand and that is a factor that will readjust the market too.
However, right now in terms of supply and demand, there is no shortage in the market, a lot of this really reflects nervousness and anticipation, uncertainty and all the kind of political back and forth that is now occurring as we go towards that November 4 when the sanctions are supposed to go into effect.
Would you say that the uncertainty would end on November 4? The markets, as you mentioned, has so many fundamentals to keep an eye on and then again the OPEC and the allies meeting in December yet again. Are you assuming that the agreement cut that they have in sense of output, would you see that going forward in 2019 as well?
The next few months are going to be very eventful. A lot of things are happening at the same time. I think that when the OPEC, non-OPEC get together in December, they will be looking at the conditions in the market and they are going to be wanting in general to stabilise the market and keep prices from shooting up.
In addition, we are going to have the secretary general of OPEC at our conference in New Delhi and I think they are watching very carefully what happens. They know that if prices go up they pay a price for it on the other side in terms of what happens to the market. So, I think the December meeting of OPEC and non-OPEC is going to be meeting aimed at stabilisation.
For India, it really has to make its voice heard in the global market. One of the characteristics or reason for our conference taking place in New Delhi is because it has recognised that India is now very important to the global energy markets. We see very considerable investments going into the downstream of the Indian market from around the world indicating its importance and so India’s voice is much more significant and important and it is going to be listened to. I know it is being listened to as I participate in discussions around the world.
The oil consumer countries including India also did talk about on how they might dip into commercial inventories and maybe stop buying crude from international markets for some time, there could be a pause. Do you actually see that happening with the kind of dependence that we have and with the kind of demand that we have? Do you see that solution even feasible really?