Booknotes

DANIEL YERGIN, AUTHOR, "THE PRIZE: THE EPIC QUEST FOR OIL, MONEY AND POWER": It's a little late in the day to decide it was a mistake. I think that, for the most part, oil has made possible a very convenient lifestyle and has made possible a whole century's way of doing things, of living and so forth. So, in general, it made possible our modern way of life. Whether we should have done it some other way would have taken some foresight and some alternative notions that weren't there at the time.

YERGIN: A decade ago, I would have thought that this age of oil would have ended more rapidly, that something, after the fall of the Shah, would have happened with prices -- that we'd move into a new era. I think having spent about seven years working on this book and thinking about it, I now come to the conclusion that the problems of this age of oil are going to last longer than we would have thought -- that it will continue well into the 21st century unless there is a major technological change that we don't see now that comes in as has happened repeatedly in history and changes things. I could be proved wrong tomorrow, but my sort of working hypothesis is that we're in this for a while longer.

YERGIN: I think it started, really, about a decade ago. The first book I'd done had been a book on international relations, "A Narrative History of Soviet-American Relations: The Origins of the Cold War," and so that was of fundamental interest. As I was finishing that book, I became quite obsessed with the issues of oil and international politics and did a second book called "Energy Future." I remember the publisher wanted to drop it, because he said it was so boring no one would want to read it. It ended up spending about nine weeks on the New York Times bestseller list because of when it came out. Finally, it seemed to me that the natural thing to do was to combine my love of writing and storytelling and the story of international politics with this expertise that I've developed in the oil and energy area and tell the story that I've told in "The Prize."

Of course, when I set out to do it, I had no idea what I was getting myself into, and if somebody would have said to me, "You're going to spend seven years on this project," I would have said, "No way." I guess just one other funny thing that sort of ties into that -- about 10 years when I was first beginning to think of doing this book, another of the New York publishers came to me and said, "Mr. Yergin, would you like to write a history for us of the 20th century?" I said, you know, "Come back in about 30 years. Let's wait and see how it comes out," and so forth. But I now find that in a certain way with "The Prize," I've written a history of the 20th century from a particular perspective.

YERGIN: That includes footnotes.

YERGIN: Well, I originally wrote this book longhand, and it was originally a 2,500-page manuscript, because each chapter became a little story in itself, and I knew that was totally unacceptable. I wasn't that much of a deluded lunatic to think that the world was waiting for that. So, I went through a very tough process of cutting it in half, so it was about 1,100 manuscript pages, and the text is now about 781 pages.

YERGIN: Oh, wonderful anecdotes.

YERGIN: Well, stories and analysis, but the detail. When you're writing a chapter, you see it in chapter size. Then when you stand back and look at the whole architecture of the book, you realize you go too much into that. For instance, I went in much more detail about how the Saudi and Kuwaiti oil was originally discovered and the negotiations leading up to that. You realize that if you go into that detail in the whole book, readers will get lost. So, I had to leave out delightful details about how the emir of Kuwait in 1934 was mad at the British because the Iraqis were taxing his date gardens which were in Southern Iraq, and that was one reason that he was interested in having an American oil company come into Kuwait. I've kept some of that in, but this whole, wonderful negotiation over the emir's date gardens -- a lot of that ended up on the cutting room floor.

YERGIN: Thousands and thousands of years ago, partly in the Near East. Oil was used, perhaps, to bind the walls of Jericho. It's thought that Moses' little basket may have been caulked with bitumen petroleum. But it was in the 19th century that we started to move into a modern period. The real beginning of it goes back to the middle of the 19th century when a man named George Bissell, who's a real founder of the world oil industry -- who was a school teacher, a lawyer, a journalist, a man who knew seven or eight languages, and a real entrepreneur; he'd been self-supporting since the age of 12 -- conceived this idea that this product called rock oil, which bubbled up springs in Western Pennsylvania could perhaps become an illuminant that could be used to replace the whale oil which had gone up to $2.50 a gallon. Most people didn't have light at all at night, and he conceived the idea of drilling for oil and hired the famous Colonel [Edwin] Drake, who wasn't a colonel. What they really did in 1859 was prove that there was a supply of oil by showing that there would be ample supply, that you could drill for it and obtain it. That instigated the first oil boom, set the oil industry off, and for the first 40 years the oil business was an illumination business. Kerosene was its main product. John D. Rockefeller became the richest man in America selling illumination.

YERGIN: Well, our reserves today are about 27 billion barrels. We have about 30 percent of world reserves, but oil reserves are not like a bank account. People often think of that. It's an economic concept that depends upon exploration. What we do know is that our recoverable reserves have been going down while demand has been going up, and we have become increasingly dependent on imports, which was quite different from even as late as World War II when the United States -- it's hard to believe -- provided 85 percent of the oil that the Allies used in the Second World War.

YERGIN: Half.

YERGIN: Twenty years ago?

YERGIN: Well, five years ago, we produced three-quarters of the oil we used. Ten years ago, we produced half the oil we use. There's been a move. Twenty years ago, we probably produced about 70 or 75 percent of the oil we used. I'd have to go back and look at the specific number, but we were mostly self-sufficient. The end of the 1940s was when we first started to import some foreign oil, and I then tell the story of how this became a subject of great contention involving people like Lyndon Johnson and John Connelly and Sam Rayburn, reflecting the interests of domestic producers who were concerned that this cheaper foreign oil was coming in and would basically undercut them in the market. There was a big political brouhaha in the 1950s that led to a quota system to try to restrict oil imports to about 12 percent of our total consumption.

YERGIN: Well, the big places are Alaska, which provides a quarter of our total oil supply, Texas, Oklahoma, Louisiana, California's a major oil producer, New Mexico -- a number of other states, but those are the biggies.

YERGIN: Zip, zero. I mean, we may sort of swap a little bit at the Canadian border and that sort of thing. Once we were the world's No. 1 oil exporter. Now we're the world's No. 1 oil importer.

YERGIN: Well, the other two real biggies are the Soviet Union, which is the world's No. 1 producer, and the No. 2 producer currently is Saudi Arabia, which has pushed up production because of this crisis and is now producing more than the United States.

YERGIN: Well, in the book I cite the words of the greatest 19th century American wildcatter, a man named John Galey, who was so good at finding oil that they said he could smell oil. Galey was the one who said, "Drill here," for that great well that became Spindletop and opened the Texas oil industry. Galey said, "Only Dr. Drill knows for sure." I'm struck that a few years ago a number of American oil companies spent $2 billion drilling a dry hole off the coast of Alaska, and meanwhile, some of the biggest discoveries have been made almost by accident when people thought they wouldn't happen -- in Arabia, in the North Sea, even in Alaska when Arco was just about to throw in the towel and it discovered the North Slope -- in North Yemen more recently.

So, there's a lot more risk and uncertainty than people think, but there are a couple of areas that are considered very prospective and have been underexplored, and they have some ironies in them. One is the Soviet Union, and we see the door possibly opening to Western capital in the Soviet Union. The other -- and this is quite ironic -- is Vietnam, which, since it's been cut off welfare by the Soviets, needs to earn some hard currency and is offering some of the best terms in the world to the international petroleum industry. A lot of non-U.S. companies are there. U.S. companies aren't there because our legislation doesn't allow it. But the Vietnamese, ironically, the same Vietnamese who were against us, would be very desirous of having these companies there now.

YERGIN: I run a company called Cambridge Energy Research Associates with my colleagues. Prior to that, I've been an academic. I taught at the Harvard Business School and the Kennedy School at Harvard, and then in the early 1980s, established Cambridge Energy -- actually the same year that I decided to write this book.

YERGIN: We're an independent, objective research institute, and our job is to analyze the energy markets and the politics and economics that surround them in order to give decision-makers in the public sector and the private sector an independent view of the forces at work and the directions they may go and the issues that are down the line. For instance, last spring we started to do work on the strategic petroleum reserve and would it work. At the time, people thought this was quite archaic, and now it has become a topic of great importance. So, we try and pick up early what are important questions that are coming down the road.

YERGIN: Cambridge and in Paris, Oslo -- where we have a group that focuses on oil transportation and tankers -- and California.

YERGIN: About 60 people with another 20 or so experts who work with us as part of our network.

YERGIN: It started really in 1982 or 1983 when I was just winding up and deciding to retire from the academic world, take early retirement.

YERGIN: Yes.

YERGIN: They tend to be people with economics backgrounds or sort of political economy backgrounds and who have maybe had some experience focusing on energy economics either in a university or think tank or perhaps government or private industry.

YERGIN: Clients are really quite a broad range. It includes a lot of financial institutions, banks, institutional investors who manage pension funds and they have to decide what to allocate, companies that produce oil, oil companies, natural gas companies, pipelines, some major energy consumers, airlines who are extremely concerned about what happens to the price of oil, and international organizations.

YERGIN: We do have a dialogue with them.

YERGIN: No. I learned something with "Shattered Peace," my first book -- that when you write a book, it really goes on. It takes on a life of its own, and it's a very heavy responsibility because it's going to be out there year after year whenever you're doing anything down the road. So, I decided early on to really take the same viewpoint that we have in our company, which is to be objective. Really what people are, are subscribers. If they don't like our opinions, they don't have to subscribe to them, because it's very important we set our own research agenda in the company. In this book, I was going to tell the story as I saw it and as I understood it, and I spent a lot of work and time to do that, so I wanted to do it the best way I could.

YERGIN: I grew up in California.

YERGIN: I grew up in Los Angeles.

YERGIN: I went to Yale.

YERGIN: I hesitate to admit this on the air, but actually my major was English Literature, and my specialty was the 19th-century novel.

YERGIN: Well, it somehow -- does oil and literature mix? Maybe that's why Mark Twain is a character in this book. When it was all over, I sort of felt that what I'd written was a Victorian novel in a certain sense with lots of characters and people. I think that as I look back on it, and I didn't think about it at the time, but I think that educational background had an impact on how I approached the story and how I told it.

YERGIN: I had a Marshall scholarship, which is a scholarship that takes you to England. I went over and did a second degree in history, and I did a Ph.D. in international relations in history at Cambridge University. I knew I wanted to write a book on the origins of the Cold War, so I really began that as my Ph.D. thesis. Then I came back to Harvard University as a postdoctoral research fellow and wrote the book that became "Shattered Peace," which came out in 1977 and then really started teaching at Harvard. I started a couple of years earlier, actually, focusing on energy questions and then was asked to join the faculty at the Harvard Business School and that led up to doing the next book, "Energy Future."

YERGIN: I can remember how it developed, which was as I was finishing "Shattered Peace." Doing history can often be -- I won't say a depressing subject, because it's a very exciting subject and an important subject -- but you look at the what-ifs of history, why did certain things happen, and I was very preoccupied: Why did the 1930s take the course they did? Why did 35 million people die in the Second World War in Europe and 15 or 20 million people in Asia? It led me back to the question of the political meaning of economic growth and the failure of economic growth in the '20s and the '30s and how that set the stage for this rapacious aggression that culminated in this terrible war for which such a heavy price was paid.

I dealt at the end of "Shattered Peace" with how, although people expected a depression or a recession after World War II, instead we had very strong economic growth and really the beginning of the growth that carried us through the '50s and the '60s. So I came away with a very strong sense about the political significance of economic growth and that it's dangerous for democratic institutions not to have a growing economy, because people start fighting and the system becomes subject and vulnerable to demagogues and so forth.

As I looked around, poked my head up as I was finishing "Shattered Peace," there was this energy crisis. That seemed to me, as I looked and thought about it, to pose the kind of question: Is this going to be the series of events that robs us of this economic growth on which our political system has come to depend and without which things can get ugly? By that point, I had a postdoctoral grant which gave me some flexibility, and I just started, really, on my own, investigating and writing about these things. I'd done a lot of writing for the New York Times magazine on international issues, and they asked me to do an article way back in 1974 about what the U.S. could do about OPEC. At that point, OPEC had come out of nowhere and was this fearsome ogre which seemed to have seized control of the world economy. All of that is what led me to do this. I started writing more and more, and that's when the business school saw what I was doing and said, "Would you come over and join us?" Since what I knew to do was to do books -- I mean, that's the way my mind thought -- I said, "Well, let's do this book." That became "Energy Future," and that was a team project. It came out in 1979 at the right time.

YERGIN: I believe strongly, in this age of word processing -- I use a word processor, I certainly do -- but I believe that word processors are too easy. They're too facile, and it leads to verbosity, and it doesn't lead to as tight, taut control of writing as you need. The posture is wrong. This was a 2,500-page manuscript. If I'd written it on a word processor, it probably would have been 4,000. I was talking with a newspaper reporter the other day with whom I was doing an interview about the book, and he was saying that's true, that when he does things on word processors, you tend to quote the whole quote rather than take the essence of the quote. I found that I had a much greater sense of control. I also like to be in a relaxed posture when I write, I mean, because it's almost -- I wouldn't call it a trance, but just a flow like a runner's high. I find, slumped out on a chair or stretched out on a couch with a yellow legal pad and sketching things out like that, it just flows more than sitting there at a word processor.

What I would do is I write it longhand, and then I would put it into a word processor, and that would be the process of editing it. I think that almost everybody uses a word processor now, and one of my favorite thoughts about that is people say how great word processors are because you can move paragraphs around. But that suggests that the No. 1 problem that's faced by writing in America today is paragraphs in the wrong place. Actually, there are a lot of other problems in writing, too, and just moving paragraphs doesn't solve them. So, I'm not anti-word processor, but from a point of view of control and style, longhand just gives, I felt, a more graceful result.

YERGIN: Yes. One's 5 1/2, or as he just reminded me yesterday, 5 3/4 in anticipation of his birthday, and another is 3 1/2. They're both excited about the book. My daughter asked me the other day -- we were driving the car, actually, over the Christmas holidays, and suddenly I hear this little voice in the back seat saying, "Daddy, why did you write 'The Prize'?" I was at a stoplight and turned around and said, "That's a very good question, Rebecca. I'm not sure I can give you an answer immediately. I will think about it." Out of the mouths of babes.

YERGIN: A couple of reasons. One is that it was in the middle of the same time of developing a business. I should say that there were real costs in terms of working all the time and the diversion of interests, but the value of it was I learned, I think, two things. One is I learned to see things from the inside of the oil industry, how people inside see it, which is quite different than it would look to a tenured professor who's quite distant from it. People have a tendency to assume that other people actually know what they're doing, and that's not exactly the case. I mean, people are reacting more short-term. Secondly, I think I learned what risk means. You have to make decisions every day, and you don't know what the outcome will be, and you hope that more than 50 percent of them are good. This is a book about an industry that's very entrepreneurial, and it was helpful, in a sense, to be entrepreneurial to understand it. So, that was one reason.

The other reason is I think that books of this dimension just end up taking a long time. I was reading an article in the New York Times yesterday about biographers, where someone took 10 years to do this biography -- Ronald Steel, who wrote the wonderful, wonderful biography of Walter Lippmann. I remember clearly Ronald saying when he was starting the book that he was going to do it in two years, and it took him about 10 years. How do you master the subject? There's always another archive. There are always more people to interview. Your viewpoint changes. I think that these big books, if you look at them -- these big narrative histories that people love to sit there and read and really get into -- there's some hidden spring that forces you to spend seven, eight, 10 years, when you're absolutely sure at the beginning you're going to do it in two or three years. I have a friend who's just starting a big biography now, and he said he's going to do it in two years, and I said, "Good luck."

YERGIN: I think I came to understand more the cycles of the oil industry and the relation of politics. I think that was one thing. I learned a lot that if I'd known it in 1979 would have changed my perspective. If I had known the story that I tell in the book about what happened in Iran between 1951 and 1954, the duel between Mohammed Mossadegh and Averell Harriman -- instead of the Ayatollah Khomeini, as it was, the Ayatollah Cashani and his threats to kill Harriman and so forth -- I would have seen events in 1979 differently. I would have had a perspective, and I think that the book provides that kind of perspective. So, cycles, politics, the importance of the history. When I started the book, the oil price was way up there, and it looked like the OPEC imperium was still going to continue. We had the price collapse, and we had the price come back again somewhat. So, a lot of turmoil in there, all of that during this period. I mean, I was watching the history. One of the challenges was to tell the story of the history so that I dealt with recent events with the same dispassionate tone and objectivity and distance that I dealt with events at the turn of the century. That was one of the narrative challenges that I faced.

YERGIN: Well, here's what happened. About 16, 17 months ago, I came to the conclusion I needed to finish the book. One of the reasons was that my editor was periodically calling me up from Simon and Schuster and screaming at me to finish the book. I was getting letters saying, "Come on, come on, enough is enough." I felt that the oil market was beginning to resemble more and more the early 1970s, and I thought this oil market was heading for a crisis. In the spring, I testified at a Senate energy committee -- I think maybe the only person there was C-SPAN --and it was an empty room. I was saying, this is a crisis-prone market, it's looking like the early '70s. One of the senators, Domenici I think it was, said, "Sometime within the next decade I'm sure we're going to be back in this room, and it's going to be crowded."

It was within seven months that happened. So, I had the sense I had to get it finished, and actually the big challenge was the cutting. Then, having read so many books that are overtaken by events so quickly, I was asking myself, scratching my head, doing the same thing we do in our business: well, what's down the road that we're not seeing? What's the next surprise? There were a lot of events starting in February, developments that made me think that whatever was going to be, it was going to be Iraq's bid for hegemony in world oil. I didn't know the invasion of Kuwait. So, in May and June I rewrote Chapter 34 and the epilogue to focus on Iraq, the Ba'ath Party and Saddam Hussein. I finished the epilogue -- which was hard to do, I remember, because we had friends staying with us when I was writing, and I would get up at four in the morning and just try and think it through -- with four points: the oil market was looking like the early '70s; keep your eye on Saddam Hussein; watch the Soviet Union; and energy and environment is this big political problem we have in the United States.

I finished it on July 28th, went off to England to read my galleys away from telephones, relax. We'd taken a little house. On August 2, at about 5 or 5:30 in the morning, I was awakened by a phone call from our Paris office saying, "Well, what are we going to do about the Kuwait situation?" I groggily found out what the Kuwait situation was. I had come to the conclusion two days before that Iraq was going to do what seemed to be the rational thing: seize the contested oil field, seize the island. Since the world couldn't spell either of them anyway, no one would notice. That was the rational thing. I did not, like most people -- virtually everybody, including the Kuwaitis -- think that there would be an invasion.

But, as a consequence of the changes I'd made in the late spring and early summer, I didn't have very much rewriting to do. I did some in the prologue and in the epilogue, but the amazing thing was how things pointed in that direction. The big challenge actually became the production process. Normally, a book with 32 pages of photographs that looks like this takes about 10 or 11 months to produce. Simon and Schuster did a miraculous job of producing it in about three months. I virtually moved into their offices in Rockefeller Center, and I remember the managing editor there said that she was going to get a cot for me so I could live in the conference room. But there was so much that had to be done. People don't know the manufacturing process, how complicated it is with a book -- but it's like a federal case to get it done.

YERGIN: It's selling at what they tell me is bestseller levels. It's on regional bestseller lists -- No. 3 in Long Island, it's a bestseller in Houston, San Francisco. It's had sort of the quadruple crown: it's had front-page reviews, the No. 1 reviews in the four major Sunday book review sections, which doesn't happen very often. It's had, in fact, wonderful reviews and has tremendous momentum. I'd forgotten what it was like to deal with the traditional book tour as you're communicating with people around the nation. But I think that the expectation is that this -- well, let me say how the publisher sees it. They see it as two things: one, narrative history that people who like Barbara Tuchman or David McCullough -- this is the type of book that they would read even if there was no Kuwait crisis, because it's a grand, epic story; and the other is that it does provide the framework that otherwise just is not there for the strategic significance and role of oil right up to this crisis which has seemed to hit the nation so unexpectedly.

YERGIN: Yes, well, my basic view is that the shadow of John D. Rockefeller from the late 19th century has cast itself all the way to the end of the 20th century because when the prices go up at the gas pump, we all get mad and we all get very suspicious. I'm sure that at the fringes, there was a certain degree of price gouging by some people, but on balance, you had a massive disruption of world oil on the same scale as 1973 and 1979. The price went up. It's now come down, at least before the January 15 deadline. In fact, one of the striking things was correcting for inflation -- which quite amazed me, because I had to do it for the book to say, well, when did we have the cheapest oil prices since the Second World War? I would have thought it was the 1960s, because I remember all these gas wars. But it turned out that actually if you took the gasoline price in the 1960s in today's dollars, it would be about $1.50. The cheapest gasoline prices were actually 1988 through 1990. This is a geopolitical crisis that involves Iraq and military force, and I think the companies are sitting there. There's a picture of company executives being sworn in by Scoop Jackson in 1974, and I think that the oil companies have learned the lesson that everything they do is going to be investigated and subpoenaed, and they know that trouble is in store for them if they try and cut corners or engage in wholesale gouging.

YERGIN: Well, our gasoline tax is about 10 percent of the gasoline tax in Western Europe. Those countries have looked to gasoline tax as a way to raise revenue. We regard a gasoline tax as an occasion for a Boston tea party. What it means is that the gasoline tax is a very small component. Yet, you think part of what's going on with all those troops out there and of all the costs of that is because of gasoline and oil supplies. Shouldn't that be rolled into the price and somehow, perhaps, shouldn't some of the environmental considerations be rolled into the price? You don't have very many congressmen wanting to stand up on C-SPAN or in the Congress and say, "Let's raise the gasoline tax." But a somewhat higher gasoline tax would at least reflect the realities of what it costs our society, the so-called social costs that are not reflected in the actual price of the physical commodity.

YERGIN: Well, from my study of the history of the oil companies and the automobile, oil companies and automobile companies are often quite at odds. When I was doing "Energy Future," I came through a case that had been done at the Harvard Business School through some of the papers and internal memos done by one of the big automobile makers in the early 1970s when the oil market was tightening, and they were just dismissing that as oil company propaganda. I think there are two different sets of view. When the callers say that there's this collusion, do they say collusion to do what?

YERGIN: Of course, the automobile makers don't like high gasoline prices. They like to see low gasoline prices. That's probably in their interest. Of course, it depends upon their fleet mix, whether they have efficient or non-efficient cars. The question about alternative fuels, I think, is a significant question, and I think that we need to have a significant alternative fuels campaign, be it an electric car or alternative fuels. There's a movement towards operating fleets, for instance, on natural gas.

I think the primary issue has been economics and acceptance in the marketplace in reaching a critical mass. As a country we have tens and tens and tens and tens of billions of dollars invested in a system that enables you to get in your car and drive across the country and fill up at all these different places and never worry about supplies. Now are we going to talk about building another system to run parallel to that, or are we going to talk about something that I think is very important -- continuing to make our automobiles more energy efficient. Either course involves tens and tens of billions of dollars. Then you have the question: well, what's going to happen to the economics? Brazil did a big alcohol fuels campaign and converted a lot of vehicles, and now they'd like to get out of it because it's just really not very economic. So, I think we should be pushing that way, but it's not because a few people have said, "We're not going to do it," but it's the dynamics of the existing economic system and technical system that we have.

YERGIN: Well, I think the answer to that -- I keep hearing that, too -- is that it ain't American oil. The oil companies were thrown out by the middle 1970s. Iraq owns its oil, Kuwait owns its oil and Saudi Arabia owns its oil. I think that I do have the story in there about Bush's visit to Saudi Arabia in 1986 when prices were very low, and he said very low prices would decimate the American oil industry, and it turns out that's true. We lost two million barrels a day of production since 1986, which is equivalent -- it's actually larger -- than what Kuwait or Venezuela were producing on the eve of the crisis. It's as though we lost a major oil-exporting country.

My own sense, and this is said just as an observer of the historical record, is that Bush does believe that there's a strong relationship between oil and America's security and prosperity. He's a pragmatic politician. I don't think that he would not only risk almost half a million American troops in the gulf, but -- let's face it -- completely put his own presidency at peril if he didn't believe that the stakes were real. I mean, he's not an ideological politician. But the other thing is, I think that because he is from the oil industry, as you pointed out, he is from Texas, I think he's probably gone out of his way not to use the "O" word. As I recollect, and I think if somebody felt like going back to look this up, but Jimmy Carter had no hesitation about talking about oil in 1980 when he promulgated the Carter doctrine which his national security advisor, Zbigniew Brzezinski, wrote -- committed America, committed the United States to the protection of the Persian Gulf security. They used the "O" word a lot then, but there's, I think, a hesitation to use it now for the reasons we've been talking about.

YERGIN: He gave me a lot of time. Some people I'd interview for a few hours. He just gave me lots and lots of hours and helped me to be precise. When you're doing a book like this, it's so easy for little mistakes to creep in, and he helped in that regard.

YERGIN: Well, I think Schlesinger was one voice out of about 80 or 90. He certainly has a strong voice, and many other people have their own strong voice, but you know what? I have my own strong voice, too, and my convictions. What Schlesinger was helpful for was understanding specific events that happened when he was on the watch in the 1973 crisis and the 1979 crisis that he was there and he was part of and made and privy to some of the key decisions. But I talked to a lot of decision-makers around the world, and the viewpoint in the book and the themes of the book are very definitely mine, and the book had been shaped long before I talked to Mr. Schlesinger.

YERGIN: Right. It reminds me of the old Mad magazine cartoon about the Lone Ranger, where Tonto and the Lone Ranger are riding all these different directions and they're surrounded by Indians, and the Lone Ranger says, "Well, kemo sabe, we're surrounded." And Tonto says, "What do you mean 'we,' kemo sabe?" I mean, are you speaking as somebody from the Northeast as a consumer or somebody from Houston?

YERGIN: I think that generally people deal with oil -- it's a very interesting question you pose and one, interestingly enough, that I haven't thought through, because I wasn't trying to make moral judgments. I was trying to sort of tell the story. I suppose, in general, people have pursued their own interests. Sometimes they've interpreted their interests in short-term ways. Take the Shah of Iran. For him, I think, oil was ultimately fool's gold. If he was a price hawk in 1973, if he hadn't pushed up the price of oil, perhaps we would not have had this huge influx of money into his country that so destabilized the society that it led to the eruption that caused the topple of the peacock throne. Perhaps his son would be sitting in that throne today. So, I think his pushing up the price and the arrogance that went with it did himself in.

I think, in general, we've had a pretty good deal in this country in the postwar years of suburbanization of oil. We've had, for the most part, readily available oil -- only a couple of times when we've had disruptions. It's been cheap. No one likes the price when it goes up. Anytime the price goes up in Los Angeles, my mother calls me and complains. My wife does the same thing. I mean, everybody does. But when you look in terms of inflation and so forth and other things, we've had a pretty good deal. We've been able to get on with our lives and go where we want when we want. But I don't think that we should think that anybody has done this out of a favor for us or because they like us. I think that nations pursue their interests and politicians do, and sometimes people suffer from an illness that was first diagnosed in the 1870s called "oil on the brain," when they think that oil gives unlimited power. It gives great power, but it also can be quite damaging.

YERGIN: I think it's a form of weakness, and what I see and the question that I focus on, looking at the rest of this decade and the aftermath of this crisis, is how do we as a country resolve these environmental values that have become such a strong part of our culture? What I always think of is we had an Earth Day last April, and somebody who was 25 years old at Earth Day in 1990 was 5 years old in 1970. They grew up with Earth Day and environmental values. I think there's a real gulf between people of one generation and another, understanding their respective values, but these values are very strong. At the same time, we do have energy requirements that power our civilization. We have come a lot more energy- efficient. I just did the numbers, looked at them again before I came on this show.

We're about 25 percent more energy-efficient today than we were in 1975. But we are going to face these tough choices. How do we produce? Do we want to be a nation that increasingly imports our energy or not? How do we safeguard the environmental values that are so strong? I really end the book on a question mark, because I see that we do it through guerrilla warfare in the political process and endless litigation. I just keep thinking there must be some way we can get a balance on these issues, a national consensus as to what kind of energy future we want as well as what kind of environmental future.

YERGIN: Hitler's an interesting case. Early on, even before I started the book, I came across a line in a book written by a German and written in the 1930s saying that Hitler had learned the lesson from General Ludendorff, who was one of the two commanders of the German Army in the First World War, about how the lack of oil at the end of the First World War had been one of the main factors that led to Germany's surrender. And Hitler, and I quote some of the people who worked with him, was obsessed with oil. He knew the history of all the oil fields, he knew their production rates. In the aftermath of the battle of Stalingrad in the middle of the night at 4 a.m. in the morning, he called General von Manstein, his commander on the eastern front, and gives him a lecture about the significance of oil in world politics and screams about, "My generals don't understand anything about economics."

He was very obsessed with oil, and I begin that chapter talking about how I. G. Farben came to him and the beginning of Hitler's interest in the synthetic fuels, making oil from coal, which Hitler really committed himself to in 1936 as part of his girding for war. In attacking the Soviet Union, he was motivated by his hatred of the Slavs, his hatred of communism, but his two objectives -- one was Moscow and the other were those oil fields around Baku, where just recently we've seen bi-ethnic civil war, and he was driving for that. In North Africa, Gen. Rommel's campaign basically fell apart because he ran out of oil. He wrote to his wife, "Shortage of petrol is enough to make one weep." So, Hitler was very focused on this as a question, because you couldn't have motorized warfare, and that's what Rommel said. You couldn't. It's all meaningless.

In 1944 in May, the Allied air forces finally began to attack the German synthetic fuel plants, which were providing about half of Germany's total fuel supply and all of its aviation fuel. Albert Speer, the overlord of the German war economy, later said, "On that day, the technological war was decided." On that day, the Allied generals had finally stopped committing, as he put it, absurdities. That was a critical moment, and the Germans ultimately couldn't get their airplanes into the air. Even though they developed jets, which would have been formidable weapons against us, they didn't have the fuel to fly them. So, in some ways you can say that in the Second World War -- in some ways; by all means, it wasn't an oil war -- oil was important to objectives, to the conduct of the war, to strategy, and to its outcome.

YERGIN: Yes.

YERGIN: Yes, at the end of the road. Ironically, the Americans wanted to save him so he could be put on trial, and the great threat was not that they couldn't find a doctor, but they couldn't find an ambulance with gasoline in it. They finally did. Japan was very focused on the oil fields of Southeast Asia. It was seen as essential to its military strength. It didn't want to depend upon the United States. We supplied 80 percent of Japan's oil. As Japan launched on its grand campaign to dominate East Asia with its co-prosperity sphere, America said, "Why are we providing the weapons, the machines, the tools for Japanese aggression?" So, we cut off steel, we cut off various machinery, and finally, after they invaded Vietnam in 1941 with no other way to express displeasure, we cut off oil. That's what finally tilted the Japanese as to their timing of their attack into Southeast Asia rather than going towards Siberia, which they were also thinking about, and also made the decision to attack Pearl Harbor, which was to protect the flank, as I tell the story, and particularly in terms of Admiral Yamamoto's thinking who thought it up, to protect their flank as they went up to the oil fields of Southeast Asia and the whole Southeast Asian campaign. That other little picture there of the models is a picture that I think most people have never seen. The Japanese made a little harbor, a toy Pearl Harbor, and that was Battleship Row where they practiced and thought through the tactics that they would use.

YERGIN: Well, the story is that Lyndon Johnson was from an oil state, he was very close to the independent oilmen and he represented their viewpoints and interests in Congress and sought to protect the depletion allowance and other factors and played a key role in fighting for quotas to limit the amount of foreign oil coming into the United States.

YERGIN: The place to look probably if you're thinking about these questions is Watergate. Watergate and the oil crisis and all of that coming together and illegal campaign contributions which came from some oil companies as well as from a lot of other companies, all of that, I think, in the public's mind really tied together the notion of oil money shaping American politics. I think these days when these battles come up, the battles that exist are over these environmental issues, and these seesaw back and forth where you have environmental groups pitted against energy companies on really critical arguments about what type of development we will or won't have in the country. I see the merit and the rationale on both sides. That's why I think these are such tough questions that we're going to be facing once the heat of this immediate crisis is over.

YERGIN: I tend not to. I see that the role that I have is to be objective and independent, to provide a framework for understanding these contentious and often acrimonious questions.

YERGIN: I think it oscillates back and forth, that it depends on the issue. But what I would like to see, and I pray that we see coming out of this crisis, is that we can have an ecumenical energy policy so we don't repeat those kind of energy wars that I described there that we had in the 1970s, which were so debilitating and leave us worse off. So, in my view it should be some from column A and some from column B and recognize that we're a diversified country with diverse interests rather than a kind of sectarian energy approach.

YERGIN: First is to recover from this. I have about three ideas in mind, but I'm still playing with them, and I think my No. 1 priority is catch up on my sleep.

YERGIN: I get a lot of questions, because of this crisis, about the significance of imported oil to the United States, struggling to understand what are the stakes, what is this about, is it about 5 cents at the pump.

YERGIN: Well, I think one is that a lot of people still don't know that we import half of our oil, and the other, I think, is that they do think that the oil companies are over there running the show when the oil companies were thrown out. We're in a different era. I'll tell you what I find. I was on a lot of call-in radio shows the other day. I found there's a lot of raw emotion on both sides of this question, a lot of anger as well as confusion.

YERGIN: I think they'll learn the degree to which American society has been shaped by the ability to have oil. My favorite statistic in the whole book has nothing to do with the price of oil. It has to do with the fact that 40 percent of American marriages are proposed in automobiles, which I take as one of the great signposts of the hydrocarbon society that oil has made possible.

YERGIN: I haven't seen it over time. I imagine as the number of cars have gone up, probably the trend has been upward as well.

YERGIN: Thank you.