The Great Simplification with Nate Hagens - Arthur Berman: "Shale Oil and the Slurping Sound"

Episode Date: December 13, 2023

On this episode, Arthur Berman returns to unpack the complexity underpinning the oil trends of the last 75 years and what new data can tell us about availability in the coming years. After decades of declining oil production in the United States, the past decade of rising oil extraction has eased many worries about peak oil. But the past few years of continued growth have been obtained by using "a larger straw", merely delaying the inevitability of the depletion of a finite resource. Art presents recent data on well productivity in US shale plays indicating we are much closer to 'the slurping sound'. How does technology hide the declining availability of oil reserves, causing us to extract and use them faster without creating any new resources? Going beyond geology, how do geopolitics, finance, and social opinion affect oil availability? Where do we go when economically viable oil isn't available anymore - and will we have the prudence to make the cultural shifts necessary before we have no other options? Have we now passed 'peak oil'? About Arthur Berman Arthur E. Berman is a petroleum geologist with 36 years of oil and gas industry experience. He is an expert on U.S. shale plays and is currently consulting for several E&P companies and capital groups in the energy sector. Watch on YouTube: https://youtu.be/qqTh2nBEcCs  Find out more, and show notes: https://www.thegreatsimplification.com/episode/101-art-berman

You're listening to The Great Simplification with Nate Higgins. That's me. On this show, we try to explore and simplify what's happening with energy, the economy, the environment, in our society. Together with scientists, experts, and leaders, this show is about understanding the bird's-eye view of how everything fits together, where we go from here and what we can do about it as a society and as individuals. I'd like to welcome my friend and colleague Art Berman back to the podcast. I think this is his fifth appearance on the Great Simplification. This is a very important and serious topic we discussed today, which is the fact that shale oil, responsible for most of the growth in world oil output in the last decade,

has been high-graded and cannibalized other wells. And we just hit a new peak in U.S. production, but Art will explain this is coming at a cost of massively declining well productivity, where wells are producing 50% less per well than they were just three or four years ago. And that this will manifest in both shale oil peaking and global oil peaking. Art says that we have effectively used a larger straw and are much closer to that slurping sound at the end of a milkshake. Of course, we're already a couple three million barrels below the all-time peak in the end of 2018 and the world economy has continued to grow. Stock markets are near all-time highs.

So a few million barrel decline in oil does not portend the end of civilization, but it has major implications for coming decades if oil supply, even if we wanted it to grow, is no longer able to grow and will be in effectively permanent decline starting about now. Very important conversation. Please welcome my colleague, Art Berman. Art, great to see you. Nate, always good to see you too. This is our fifth podcast together, I believe. What you may not know, but my phone told me today is this is our 3,000th time of talking. Is that all?

No, I'm kidding. I know. I think it did. Well, it's probably about right. Yeah. So you have been hard at work on some new, very important. oil-related research, which we're going to unpack today. For those people that have not heard our previous episodes, let me do a brief recap of assertions,

and please chime in if I'm missing something. So we talked about what is oil. It comes from ancient oceans and seas buried under geologic time and pressure. how important it is to our economies. Energy is incredibly important, and oil is effectively the hemoglobin of our modern system. We're nearing metaphorically the bottom of the barrel because we found all the conventional plays,

and now we're adding unconventional, including shale oil. There's plenty left, but the ability to extract it and grow what we have now, is that issue and how fast they decline might be another issue. We also talked about how in a barrel of oil, there are many other products in addition to gasoline, including an especially diesel fuel,

which is one of the most important products in the global economy, and that we have to refine those products off sequentially. In other words, You can't just divvy up a barrel, every barrel, into all the pieces and extract less per se. We also talked about how increasingly what we call oil by the Energy Information Agency and other analysis is not really oil. And in the United States, our growth in production is increasingly have a larger fraction of what's called natural gas plant liquids, which get processes. into you use the term baggies quite often. So what we call oil is not necessarily the oil of the past generation.

And lots of economic implications of all that. Is that a fair two-minute recap? Excellent. Yeah, that's perfect, Nate. So when we talk about how much oil is there, We talk about global oil production, which of course is a misnomer because it was produced long ago. We were extracting it and refining it and turning it into products that humans use. Is it fair to say that that is a composite of three things?

One is all of the wells that have been drilled in the past and the technology that's still getting oil from those wells and fields. Stacked on top of that is the new wells that are drilled. And then the technology that's involved in that. And then the third would be, what is this stuff we're getting out of the ground? What is the composition of it? How useful is it? Is it a lot of sulfur? Is it heavy?

Is it light? Is it natural gas plant liquids? So do those three things kind of tell the story of how much oil we're extracting? They do. and I would simply call category three oil quality. Oil quality. Good, good. So tell us about your new discovery in that you've been working around the clock to analyze the past month or so,

and we're going to unpack it together. Sure. So I was asked to help on a project, a mutual friend of ours up at the University of Texas, asked me if I would help him put together a U.S. oil and gas production model going back to where the data begins for convenience around 1950, and to give him the necessary parameters that he could use to model that for a much bigger macro analysis. Now, I should be embarrassed, but I'm not, that I have never gone back that far and done anything more than just look at production. But what I had to do for Carrie King was to actually look at what was the well performance like in 1950, in 1960 and 1970. And having done that, it gave me some really new perspective on the peak oil movement, if you want to call it that, that you and I were both involved in in the early part of this century.

and are still involved in. Well, and we still are, right. You know, some of us don't give up. We continue to believe that a finite resource eventually will become scarce. Well, if someone's hair was on fire, we would feel compelled to continue to tell them their hair was on fire, which is a metaphor for our preparation as a society for coming decades, but go on. For sure. So what I learned, first of all, was how right.

we were, that the productivity of the average well in the United States, and let me just say, I'm not being U.S. centric here, but I mean, in 1950, the U.S. produced something like 70, 75% of the oil in the whole world. So, I mean, particularly back then, it was really important, and we are still today the largest producer, and it is our recent production increase, say, from 19, or 2010 to the present, of which all of the growth in oil production has come. So the United States is not just important. It's kind of critical in the mix. But what I discovered was that back in the 1950s and 1960s, the average well was a pretty darn good well in the United States. You know, it was 150, 200,000 barrels per well on average.

by the late part of the 20th century, that had dropped down to about 20,000 barrels a day. Now, 20,000 barrels a day sounds like a lot of oil, and it is as a consumer, but there's hardly a company in the world that can afford to produce a well that only makes 20,000 barrels in its lifetime. And I didn't realize exactly the magnitude of how urgent it was. to find new reserves. And so that was an aha. And then when the tidal oil and the deep water and the offshore Gulf of Mexico started coming on, those average wells were from, you know, five to 50 times more productive than even the really good wells back in the mid part of the 20th century. And the shale wells were in the same,

in the same category. So on the one hand, what it showed me, it really emphasized how dire our situation was in 2000, 2005. We were living off of wells that weren't commercial to produce for all intents and purposes. And it also emphasized all this unconventional oil, offshore, deep water, shale, how what what a step change it really was on a per well basis. I mean, it was, it was huge. And back in the peak oil days, I was one of the people that was saying, oh, the stuff is, you know, it's never going to be commercial. And if it is, it can't contribute all that much. Well, I was very wrong. We were all very wrong. That was kind of the problem with peak oil. But the real, the real jaw dropper in the study, I guess, was looking at U.S. production today, it's declining at a very precipitous rate. And the shale plays, again, the average well performance is declining at a really concerning rate. So what that says is we're heading back to where we were in the 1990s and early 2000s, unless I've got something very, very wrong.

In other words, the unconventional plays bought us about a decade or a decade and a half, and now we're probably looking at something, well, nothing's ever the same as it was, but a situation that's potentially similar to when we were worried about peak oil the first time around. Lots of questions. First of all, you just said U.S. production is declining. Didn't we just hit an all-time new, slightly new high? Well, I didn't say U.S. production was declining. I said the performance of U.S. wells is declining.

But you're absolutely right. The U.S. just barely exceeded 13 million barrels of crude oil and condensated day, which was the pre-COVID peak back in early 2020. And so some of us probably did not expect that. to happen. I didn't rule it out, but I was a little surprised when it did. And what's more surprising is that the experts and the U.S. government, the Department of Energy, believe that the average production for 2024 is going to be a little bit more than 13 million barrels a day. And they may be right. I'm not saying they're wrong. I'm simply saying that if I'm right about the per well

performance dropping off, and it's not just dropping off, it's been dropping for several years. It's going to be increasingly difficult to maintain that level of production. So I want to underscore, I'm not saying that the EIA, the Energy Information Agency, administration is wrong. I'm just saying that there are some challenges that go into that forecast or projection that I wasn't aware of until I did this work. So what does that actually mean U.S. well performance? Does that mean the total amount of oil that has ever gotten from a well or the per day? Or can you explain? Yeah. So there's a lot of ways to measure it. But the simplest way is what we call estimated ultimate recovery, which is how much oil and gas, of course, an average well makes over its commercial. lifetime. So at some point, I mean, the well might go on making three barrels, four barrels a day

forever and ever, but at some point, you don't get enough revenue from what's being produced to even break even on your operating expenses. So, I mean, you have to operate a pump. You have to run electricity. You've got to pay staff to, you know, in the office and in the field. And so at some point you reach a level where you just say, okay, you know, that's it. At least for our company, we can't afford to produce this well anymore. And so that's what it is. It's simply a projection. You take all the production history that you have, the data, and you project it out at some defensible rate that's consistent with the previous historical data out to an economic limit, and you add it up, integrate under the curve, and that's your EUR-estimated ultimate recovery.

And so what I was, to go back to where I was before, if an average U.S. well, let's just say in 1990, made 20,000 barrels of oil in its lifetime, the average U.S. well in 2020 made 325,000 barrels. So 15 times as much more oil per well? per well. And so the better your individual well is, the fewer new wells you have to drill in order to maintain the level of supply that the country and the world needs. So that's good news. It is good news. It's excellent news. The bad news is that that well performance, that average lifetime production per well is declining. Now, there's another component, and I'm going to I'm going to circle back to your question about how come U.S. production is at a new peak?

And the answer is, is that there are two parts. There are rates and reserves. Reserves are the estimated ultimate recovery for all practical purposes. How much the well's going to make or the field's going to make or the state's going to make or the country's going to make over a certain period of time. The other component is how fast does it come out of the ground? And what I saw, and this doesn't surprise me at all, is that even though the new wells are not performing as well in terms of how much oil they'll make over their lifetimes, their daily rates early on are much, much higher. And so we're getting a whole lot of that production early on. That's what technology is done for us. It's like I'm sucking on a milkshake and suddenly you gave me a wider, you know, a straw that has a bigger diameter. I can suck more faster. It doesn't add anything to the well. The well still, you know, produces the same amount as before. But I get it out sooner and faster. And that's what's responsible, I believe, for the 13.1 million barrels a day. is even though the wells are going to perform more poorly in terms of their lifetime recovery, they're front end loaded.

And we're getting exceptionally high rates early on, and that's what's boosting U.S. production. So the disconnect here between this view and the conventional extrapolate today forward into the future financial view is that this new high production brings us much closer to the slurping sound of depletion in these wells. Whereas looking nominally at busting through 13 million barrels a day again, people could just extrapolate that forward. Look at the growth from 2020 to now and extrapolate that forward to 2030, and that's not going to happen. Well, that's my sense of it. I've been wrong before, but as I said a little while ago, it just gets increasingly difficult to do that. And we add to that the fact that investors are not too keen on drilling, on giving oil and gas companies money these days. Back not very many years ago, you know, 2015, 2016, 2016, investors were lining up to throw money at the oil,

companies. That's not the case today, and there are a lot of reasons for it, but mostly the oil companies are having to get by on the internal cash they generate, which is substantial at the moment because oil prices have been up to $100, $120 a barrel. But it's very difficult to grow any business without getting some money from the outside. And right now, investors just, I mean, nobody's lending, I shouldn't say nobody, but effectively nobody's loaning oil companies money. And maybe that'll change if the urgency starts to get more severe. But for right now, that's not the case. And I think most people, the market particularly thinks, now we're transitioning to an electric economy. You know, we're going to hydrogen and nuclear and

renewables. And, you know, that's what's going to, that's what's going to power the future, not, not oil and gas. Do oil and gas companies want money, need money for drilling and upstream investment? Oh, yeah. They, they desperately, I mean, it's, you know, a well, an onshore well in, in Texas or New Mexico in the Permian Basin. And we're talking, you know, $6, 7, 8, 9, 10 million dollars per well, depending on how deep it is. And, you know, You know, how, how, if we need $6, 7, 8, 9, 10 million dollars, what would be the kind of minimum EUR estimated ultimate recovery of a well to make that financially plausible? Again, it's a combination of rates and reserves, but to give you a simple answer, today we need

pretty nearly 300,000 barrels per well at around $100,000. spot price to break even, and that includes all the operating costs and, you know, the overhead and the interest on debt and everything like that, plus an 8% discount out into the future. And is this known in the industry, I would assume? Yeah, absolutely. I mean, you can't book a reserve unless you can show that it's commercial at current rates, at current prices, and that it includes. I think the SEC actually requires a 10% return to Booker Reserve.

How much of that 300,000 barrels, can you just give me a rough estimate of if that well is drilled? How soon with conventional technology and the current kind of well performance, do we get like 70 or 80% of that out in the first year or two? Or is it take 20 years to get it? Or what's that like? No, most of the, most of the, if the well hasn't paid, itself out in three or four years, it never will. So these wells are, again, front-end loaded. They're going to, they're going to decline, you know, 40, 50, 60 percent over the first year or two. And that's not a bad thing. I mean, there's a lot of people that criticize Shale plays because they have high rates of return.

Well, unfortunately, you know, I've got news for them, and that is that, you know, all the really commercial plays in the world, have high rates of decline. You want as much cash early on as you can get to pay out your gigantic upfront expense. It's the time value of money. So there's nothing intrinsic from a financial standpoint. High rates of return are fine. It's just for the for the rest of us looking forward to, what are we going to do for an energy supply in 10 years or 15 or 20 years that it starts to look a little bit concerning. So let's look at some of the graphs. You sent me some slides, which we will share to the viewers. Can you walk me through what we're looking at in slide number two? Yeah, slide number two. This was actually a slide that you asked me to make. And I've updated it. Because I think it's real

illustrative of what's going on, but please explain it. So this is this is US production. going back, you know, to 1900, pretty much. And what I've done here is to divide it into the green is conventional, you know, like onshore, bread and butter kind of oil production. That peaked in around 1970, peaked for the first time. And then Alaska came on, mostly Prudeau Bay. That's the yellowish orange. And that brought us up to pretty much the same level again by, you know, the mid-1980s. And the offshore then started actually after the war. That's the blue, the Second World War. And all of that then was in fairly serious decline by the time period I was talking about. You can look at 2008 on the graph. We were down from nearly 10 million a day to half that amount,

5.1 million barrels a day. And that's when shale came in. That's the, you know, the Mount Everest in red that says tight oil. And that boosted the U.S. production up to where it is today, pretty nearly 13 million barrels a day. And so what this graph shows is just how incredibly dependent the U.S. supply is on this relatively new source of oil called tight oil or shale oil. And everything else, with a few additions here and there, is still on the same depletion trajectory that it was beginning in 1970. Okay, let's stay in this graph. I have several questions. First of all, the yellow, which is not a contiguous part of the United States, but is part of the 50 United States. It looks like it's, unless it's a spandrel of your graphic technique, it looks like it's approaching zero.

Well, it is. And this is not an incremental chart. This is, you know, these are actual values. And so the Alaska production, despite the best efforts of the companies that produce that oil on the North Slope and the Alaska state government are struggling to even keep the pipeline that brings it from the north part of Alaska down to where it can be marketed. I mean, that pipeline is going dry. They've simply, you know, they've largely depleted the supply. Now, companies are up there drilling and it's not like it's gone to zero, but, you know, a company,

company can make money, but it's not contributing a lot to the overall U.S. supply. Okay. And then stripping out the red section, which is the tid oil, which I'll get to in a second, the rest of it, the conventional, the Alaska and the offshore are all looking a lot like Cantorrell or something that, I mean, the whole amount is in decline and seemingly accelerating. that's certainly that's that's what the data says yes exactly right so how much of our oil in the united states that we extract is tight oil versus the rest roughly 70% 70% is tight oil yes and so what's what do we drill next after tight oil uh no one knows Nate that's I mean but this is where we were in in 2005

before the tight oil came on the scene, it's like, okay, what are we going to do next? And the answer up until that time had been, well, let's go explore elsewhere in the world. Let's, you know, let's drill wells off offshore Brazil or off of West Africa or let's, you know, try to find some new frontier areas in the, the onshore basins of Africa. And at this moment, I mean, we never know, you know, what's still out there. But it seems as though we've, we pretty much know what's commercially available and what's not. And the answer is, we don't know. We don't know where we're going to go. Are there more tight oil plays? Well, you know, somewhere in the world there are, and they're being worked on and developed. But in the United States, you know, we've pretty much

tried all of them. I mean, there was a big flurry of, you know, let's try every tight oil play and shale gas play that we can imagine. This was back in 2010 through 15, and most of them proved not to be very commercial. And so we're kind of down to the three shale oil plays, the Permian, the Boccan and the Eagle Ford that worked. And of those three, two of them are are pretty much in decline and the Permian still growing slowly. But your analysis of the Permian well performance suggests that the Permian two is about to peak and decline. The average well performance has peaked and declined, but it's being held up by exceptionally

high rates and the large number of wells that have already been drilled. We're making up for it on volume. That's exactly right. that's what we're doing. And so I'm not, I'm not saying that we should, you know, the people should be looking for the Permian Basin to, to roll over and decline in the next three months, six months, nine months, 12 months. It's certainly possible, but it's not that simple. I mean, there's, you know, there's 40 or 50,000 tight oil wells out there. And there's a, there's a considerable lag between drilling, bringing them online and actually having them build to, you know, to some respectable level of a couple of years.

So, you know, there's an error bar. There's a window in which we don't quite know what's coming next. But we do know that the average well performance in terms of what it'll make over its lifetime is lower. So staying on slide two, then looking at the red, which is the tight oil, there was a peak. which I guess was 2019 before COVID or something, and then we had a decline, and then a new peak just recently. Is that correct?

Right. So that first peak was just as COVID began. So again, there's a lag. All of the production in the United States is, well, yeah, for several weeks, I mean, almost all of it got shut in because there was simply no place to store the oil. Yeah, I remember.

I remember. But it took a while for that to show itself on this scale. But then after COVID in 2021 and 2022, money came back in. There was storage that was freed up. And it's pretty well built since then. But again, the build has been in the Permian, the Baccan and the Eagle Ford. And there's a couple of other less important plays than Ibrahimra. on the Woodford, et cetera.

You know, those are sort of base load. Those are, those are just kind of flatlining. So this is mainly, mainly Permian base in West Texas and and southeastern New Mexico that have accounted for this increase, recent increase. And looking at the graph, without understanding everything you just said, if this were a stock price and not a measure of geological provinces, stacked together, one would say, all time high, we're going to off to the races. It's a buy. Yeah, exactly. Yeah, we're going to the moon, right? However, and I learned this from you,

the tight oil, the shale oil, shale where it is, is where all the other oil migrated from. It is the source rock. There's nothing left after that except perhaps oil shale, which is not fully cooked. Can you comment on that? Right. So we've known about what's called oil shale for, I don't know, 100 years at least. This is, these are source rocks that are a lot of them at the surface in places in Colorado, and Utah mainly. And so these are, I mean, these are rocks that if you walk up near them, you'll smell the oil. You know, you hit them with a hammer and there's oil. that's, you know, they're saturated, you know, to some extent with the oil. But as you said,

they haven't been buried deeply enough. They haven't, they haven't been cooked. They haven't been in the kitchen long enough. So they're, they're immature source rocks for the most part. And what has to happen is for us to use it. And there were great schemes back in the 1970s, you know, to mine the stuff and heat it, you know, cook it in giant ovens or, you know, to, you know, to. And, you know, to even use nuclear energy to somehow heat it up to, you know, to try to hasten the, the thermal maturation process. There are obvious environmental problems that got in the way. And despite several false starts, I mean, you know, that's not going anywhere as far as I know. But if you had to bet and U.S. oil production declines as you are inferring and we're going to get to some

projections on that. Would you guess that, well, we could either find other tight oil plays in addition to the Permian and the Eagleford, are there any of those? And if not, are we going to try to do oil shale? Wow. So, as I said a little while ago, I think we've pretty much sampled all the tight oil plays and shale gas plays in the United States, including places like Alaska. And at some price, some very much higher oil price, some of them may actually become commercial. But none of them

were successful. There are deeper horizons within the, you know, the Baccan and the Permian that certainly, I mean, I would go too long before I tried to artificially cook the oil shales of Colorado and Utah. Again, the environmental concerns out there are just overwhelming. Okay, so back to this graphic, I remember when I asked you to make this, it was four years ago because the U.S. had just peaked, and we were talking about global oil peak. So the U.S. just made a new peak of around 13 million barrels. And we still consume what, 20, 21? Well, that, yeah, that's refined products.

So there's, you know, we're comparing apples and oranges a little bit. But yeah. So this is crude oil and 20 is gasoline, jet fuel, kerosene, et cetera. But has the world made a new peak? Because I think the world peak of all liquids to my knowledge. is still fourth quarter of 2018? Yes, and so we are still a couple of million barrels a day below that as of the latest data that I have is May of 2023.

We can project that forward and say, well, you know, we're on track to beat that peak too, but, you know, we'll see about that. Except if the U.S. is imminently peaking because of the well-performance issue that you just outlined. And the Permian, the U.S. has long ago peaked if you exclude the Permian. Actually, maybe you sent me a graph on that. Would you like to describe graph number three? Yeah, number three shows four things. The blue is all U.S. crude oil and condensate production,

including the November 2023, 13.1 million barrels a day, which will be a little bit lower, just below 13 million, the EIA says in December. Then the orange line is all the tight oil. That's about 9 million barrels a day, a lot of it. So, you know, that's where the 70% comes from. Nine out of 13. Okay. Yeah. And then the next line down, the red is Permian. So six of that nine is permanent. Six of that nine comes from just one of the shale oil regions. It's the granddaddy.

It's the big one. Yeah, it is. And then the gray line at the bottom is that orange tight oil minus the permian. So it's a little bit less than three million barrels a day. But back to where we were a bit ago on the first graph, this just shows how incredibly dependent the United States is. on on tight oil and the Permian in particular. And the world though, too, right? Didn't you say that the majority of oil production increase in the last 13 years is just from this red sliver here?

Right. And there's a graph that shows that as well. And I think that's our slide five. And so on this graph, I'm showing world conventional in green. deep water and oil sands and other, you know, kinds of dribs and drabs of less conventional supply in orange, and then the tight oil is in blue. And you can, you know, just in your mind, draw a flat line across there, starting, you know, back in 2005 or 10 at the very most, and see that all the other oil in the world, except for tight oil, has at best been flat.

And so all of the growth in world supply has been the blue since at least 2010. And someone might say, well, it's only, you know, seven or eight million barrels a day. How important is that? And the answer is it makes all the difference in the world. I mean, that's because, I mean, even one million barrels a day of deficit in supply is enough to drive oil prices up to a hundred. $120 a barrel. I mean, that's what OPEC has been doing here for the last couple of years. They've been withholding oil to try to keep the price up. So we use so much oil to keep the world running, to keep our factories and machines and houses. I mean, everything we do relies on oil.

And so if we're down 1%, we're screwed. I don't think a lot of people understand that. And I think when we talk about oil peaking and real simply peak oil means that we're dependent on a finite resource that has incredible energy density and work potential that replaces what humans used to do manually. And it will one day hit a maximum and then decline. That is a given. But when we talk about that, we're not running. There's two implications, I think, and I'll ask for you to chime in. One is we're going to have to figure out in coming decades and century what we're going to do when we have 80% as much oil, 60% as much oil, 40% as much oil, 10% as much oil down into the future. That is an important question that society really, if we had wisdom,

and foresight would be addressing. But the second, which is more of the focus of my work with this podcast and my organization, is once we stop growing and start declining, that calls into motion all sorts of deltas differentials between society and finance and government expectations of what, extrapolating the past forward to a reality. So there's a, there's a, um, what do we do about our financial claims once energy, especially oil start to decline? That's a separate question and one with, with hugely important consequences. How do we fight our wars? I mean, you know, we use an awful lot of, uh, a awful lot of oil just to, to move all that equipment around. But, you know,

you said that oil is hemoglobin. Think about it as oxygen. Okay, think about if you're, if a person's oxygen saturation dropped 5%, what would happen? I mean, it's only 5%, right? But, I mean, very likely you would have, you might collapse. You would certainly have to sit down. You'd be like, I mean, you couldn't function with a couple of percent less oxygen saturation in your blood. And that, that would be the effect of, of, of,

losing just a couple of percent of oil supply for the world's metabolism. Let me put you on the spot here. You mentioned war. Is it possible that the powers that be actually understand everything that you've presented today, and this may be one of the reasons that the United States is aggressive in Ukraine and Russia and the Middle East, etc., because now is the time when we do have an abundance, quote-unquote, as we're looking at production, but underneath that is the well performance, which is in decline, and that implies a much different next decade. The military is always extraordinarily mindful of and sensitive to their energy and oil supply,

more if if if politicians and the State Department had the same perspective as the military we would not be in the situation we're in today because they know what it takes to run an army and it takes a hell of a lot of oil i mean one of the reasons that uh the united states that franklin roosevelt um made a bargain with the king of saudi arabia in 1945 was because he believed He knew that one of the main reasons the United States was victorious over Germany and Japan was that the United States and its allies had better access to oil. I mean, period. You can't run an army, all those jeeps and all those supply lines and all those tanks.

You can't run an army without oil. And so he, at a time when the United States was the soft. Arabia, it was the OPEC plus of the world, 1945, Roosevelt was, he talked to the king of Saudi Arabia on his way back from Yalta. You know, he just got done dividing up the world between Churchill and Stalin. And oil was so much on his mind that he had a meeting with the king in the Red Sea, in the, you know, in the Suez Canal to talk about how Saudi Arabia, could help us and we could help them. And of course, in 1945, I mean, Saudi Arabia was just, you know, it wasn't on everybody's mind. It was a relatively new kingdom. I think it had founded in 1932 or something like that. So he was, you know, he was way ahead because he was listening to his military guys. He just got done fighting a big war. So he was attuned to the military perspective on energy and oil.

So I'm going to get back to the global perspective in a second, but let's drill down on your findings. So you've basically, with your analysis you did for Kerry King, showed that the Purwell, EURR estimated ultimate recovery in the Permian has dropped by like 50% in the last few years. Is that correct? Yep, that's sadly correct. And other than we drilled the best first and now we're going after other ones, what can explain why that happened? It's a very good question, Nate, and one that I have struggled with. And my most likely explanation is that we've overdrilled it, that we have drilled our wells too close together. And so what's happening is that the wells are,

cannibalizing one another's production, that there's a radius away from each individual well to which or through which oil will naturally flow to the lower potential energy in the well bore. And if you drill another well within that drainage radius of the first well, both wells are going to go on producing, but they're going to be cannibalizing each other's supply. And so both wells will end up producing less in their lifetime, if that makes sense to you. It makes sense like when I was eating a pizza with my brother, sort of, same sort of situation. Exactly. But let me ask you this. Are those competing wells drilled by the same company, or are they sometimes different companies even that have different leases that are adjoining?

In the past, you know, back in the in the days of the, you know, the black and white movies, you know, the, the gushers and all of that, everybody was drilling trying to, you know, steal his neighbor's oil. But today it's not the case. I mean, very, more than more often than not, it's the same company, you know, that's drilling these kind of pitchfork patterns of wells that are all coming off. of the same drilling pad. And why are they doing that? Well, you know, the answer is I don't know, but the maximum power principle. Well, yeah, let's get as much out as we can right now. But I remember back, you know,

five, six, seven years ago, reading Society of Petroleum Engineer papers in which they had analyzed all sorts of great new technology as micro-sizemic data to, And they were saying, look, we can't have these horizontal wells much closer than seven, eight, nine hundred feet apart, because if we do, they're going to cannibalize each other's production or interfere with each other's production. Now, in the Permian Basin, we've gotten a whole lot closer than that.

And the Permian has, because it's such a monster of productivity, has rewritten a lot of the rules about what. works. But my sense is that we've gone too far. I can't say that categorically, but that's my most likely explanation. So to simplify it, to help me understand it, let's say that a company or two companies have two adjoining properties, property one and property two, and they look at all the seismic and the mapping, and both of them say we're going to get 10 units of oil out of here. And so they build all their expectations on that. But then what happens is they drill them both at the same time. And because underneath the ground, that oil is liquid and flowing and permeable,

that they actually, neither one of them gets 10. They might get 9 and 8 respectively because the two plots are right next to each other. Is it something like that? It's actually worse than that. What it is is that these companies, If you have a square mile of land, one mile by one mile on the surface, they will plan to drill six, seven, eight wells, the same company in that square mile all from the same surface location. And it looks like a rake. The map of the horizontal wells underground looks like a rake.

It's got all these tines coming off of it. And so they know ahead of time that they're going to drill at least half a dozen or more wells that are going to end up being much closer to each other than the thousand feet apart. Because they're not optimizing for ultimate amount of oil from that region. They're optimizing for getting it out of the ground faster to sell it for monetary return. Well, I'm going to give them credit and say that I think that somebody said, hey, we can get even closer than we thought before because this basin is so special. Because, you know, we're using all this really great new technology and our fracks. But let me finish where I was going. They will drill, let's just say, eight wells per square mile. They'll drill all eight of them before they complete any one of them

because you use a rig to drill and you bring in a different rig to actually do the fracking and the completion. And so they'll drill all eight wells. They'll move the drilling rig off. They'll move a completion rig on and they'll run the pipe and they'll do all the things they do. They'll do the fracking. And then all eight of them pretty much will start producing

at the same time. And part of the idea there is actually to frack in between them, to get the maximum amount of contact with the reservoir possible. And so I'm willing to, I'm willing to say that I believe, I mean, the guys that run these companies, you know, they're not, they're not, I mean, they're smart. And, and, and I think that they, they were convinced. Maybe they still are convinced that what I'm saying is wrong. And probably somebody's, or, or, or, or. they really believe that what you're saying is right. And if you're right, they're just going to go and find another shale play and develop that one in the same way. Well, perhaps. But let's keep perspective on this. Part of the reason that investors don't want to give these shale companies any more money

is because their view is that those guys destroyed a lot of capital over the last second. And there's a very prominent climate change story out there too. Definitely. Definitely. But the first strike against them was, hey, we've been giving you money for a decade and you haven't made us any kind of decent returns. So we're not giving you any more money. And I think that happened before the climate awareness started growing, but they kind of coincided. So the companies have a reputation and a history of doing things that are not good for investment investor returns. And still, we look at all the sectors in the S&P 500. And the irony is, is that energy is the most important sector to our lifestyles and our

future, perhaps not to the environment, but to the way our economy works today. And it has among the lowest returns. and is among the lowest of the sectors in terms of its percent of the of the of the s and p 500 you know it's like four four and a half percent so can you talk about rig count um yeah rig count um what what is rig count and why is it important and how can the current rig count situation uh inform the prognosis that you're laying out here Well, on a very simplistic and logical basis, you don't produce any oil unless you drill a well. And so there ought to be pretty much a one-to-one correlation between how many rigs are working, drilling wells, and how much oil you should expect to get out of the ground sometime in the near future. And that's always been. Rig count is something that for all of my professional, career, when that data comes out, usually on a Friday, everybody pays attention. Okay, did the rig count for oil go up or did it go down? Did the rig count for gas go up or go down? And investors

would, you know, they don't worry too much about what happens this week or that week. But over time, you know, hey, it's gone down for the last four weeks. That's looking bad for supply. Longer term supply though, right? Because there's a lag from when the well is drilled to when the first production comes out. Well, yeah. And part of that is because of what I just described, that you're going to drill six, seven, eight wells before you even go in to complete them. And so if it takes you, let's just say for argument's sake a month to drill each well, then, and let's say you got eight wells, then you got, you spent eight months. drilling the wells. You've got a rig working all the time, one rig, and you drill eight wells,

and it takes you eight months, let's just say, and then you got to go in and complete all those wells, and maybe that takes you, you know, another month and a half, and then you got to get them hooked up to production, and by the time they, you know, it's easily a year or so before any oil is flowing at all, and by the time that rate builds up to the point that it actually makes the difference. You're talking, you know, 18 to 24 months. And so the rig count is increasingly disconnected from the production itself. So right now that this 13.1 million barrels a day that we're seeing in late 2023 as a record that everyone's like, look at the USA record production and oil, is an artifact of the rigs that drilled in early 2020.

and late 2021? Yeah, generally. I mean, you know, it's going to vary from operator to operator. But yeah, it's an artifact of something that happened a fair amount of time ago. And so things could be looking really kind of dire, and yet it would be 12, 18, 24 months before we started seeing the effect of that in production. So then there's two things that we can speculate on. Well, one thing we can know and one thing we can speculate on.

Today, we can look at the rig count, which in a second I'm going to ask you what it is. But then also the well productivity you're saying is a 50% decline in the Permian in the last few years. So to stay flat, we would need to have twice as many wells if the, the, the, the, production is, is only half of what it used to be. Yes? Yeah. I mean, you know, so we're, yeah, you're, you're exactly right. And what is the rig count doing these days? The rig count today is, um, let's just say it's, you know, it's five or six hundred wells for oil. I'm, I mean, I'm, I'm, I'm just kind of guessing that. Um, So we are, yeah, we're looking at for, you know, for the U.S.

We're talking about something like 800, 800 wells overall. 800 rigs or 800 wells? 800 rigs, I'm sorry. So the U.S. and Canada's 800, U.S. is like 600, 625. And how does that compare to a couple of years ago? Oh, well, you know, before prices collapsed in 2014, I mean, we were, you know, You know, we had several thousand wells drilling all the time, but there was like a revolution in technology that took place after that collapse in prices, and we went to a completely different

kind of rig that was much more efficient, could drill wells a lot faster. And so everything we thought we knew about rig count had to be recalibrated in 2015 and 2016. And what's happened here in the last, well, since COVID, really, in the last two or three years, is that the rig productivity, the amount of oil that can be attributed to the drilling by one rig has increased yet again. Now, a lot of people get that confused. They look at this drilling productivity report that the EIA puts out every week and they say, oh, it keeps going up. That's great.

Well, yeah, but rigs don't, I mean, you need to drill a well to produce oil, but rigs don't produce oil. Welles produce oil. And I think a lot of people either confuse that or lose sight of that. So, you know, having a very productive rig is good for costs, but it isn't necessarily doing anything for, you know, for your oil, for the kind of oil supply that you need in the future. My point is that just like, you know, when I bought my first car, if it wasn't performing the way I wanted to, I could pull over and, you know, open the hood on that VW bug and take a screwdriver and adjust the timing in five seconds, close it, get back in the car, and it perform better. I can't do that today because the technology in my car is so complex that I don't even know, you know, where to find the timing in my car. And that's what's happened with the oil rigs, too, that the technology has just gotten so sophisticated that to make that direct connection, oh, my car is not working very well, I'll turn a screw, or to say, well, we've got 600 wells and we used to have 700. I don't even know what that means anymore because the rigs are more productive. So there's an increasing disconnect between how many rigs you have and,

what oil you're going to be producing in the future. I always tell people, look at the number of wells that are producing wells that are being added every month. That's what we need to know about. So we have reached the end of the easy part of this interview. Yeah. Now is going to go into the hard questions. Oh, no.

Maybe my dog will bark and interrupt us. Let me summarize first. So you've laid out that shale oil, tight oil, is 70% of U.S. production. Right. And its existence forestalled a peak in U.S. production and world production earlier this century. That we just in the U.S. hit 13 million barrels, which was an all-time high. But that that was largely from wells that were drilled 18 to 24 months ago. and your recent research has shown as not only have the Hainesville and the Eagle Ford and all the other shale plays peaked and are in permanent decline,

but the Permian, which is the granddaddy of them all, is still growing, but that you're seeing the EUR, the well productivity, has dropped 50% from 2019. Right. And you think the most likely reason of this is they're overdrilling and they're cannibalizing to get. more oil out now without really a plan for the future. And I think you mentioned that today, given the day that you're seeing, is that we would need $100 a barrel oil at some, you know, reasonable discount rate for new drilling to make sense in these plays. Is that a fair summary? It's a fair summary. And let me, you know, give the necessary. caveat here, and that is to say that there is uncertainty, particularly in evaluating

recent production. You don't have a tremendous amount of history in a new well. So when I'm looking at 2023 production, I don't even yet have a year of monthly production to look at. So I'm having to say, well, it looks like it's declining pretty much the way 2026, 2022 and 2021 did, but I could be wrong. But what I'm not wrong about, Nate, I'm not wrong about the fact that 2019 was higher than 2020, which was higher than 2021, which is higher than 2022. I'm very confident that there is a progressive decline in well-performance over the last four or five years. Now, the... In the Permian. In the, well, in the Permian, in the Eagle Ford and the Bakken, they're all doing the same thing. And what I'm reasonably

confident but less confident in is that the most recent data, the 2023 data, is following that that same decline trend. And that's what will be 50% of 2019. If I'm wrong, and I have to revert and say, well, actually, you know, I'm only confident back to 2022. Then I'm going to say, okay, so the decline instead of being 15% is 38% or so. It's still pretty severe. But, you know, so I have to be careful here. I don't want to, you know, I don't want to overstate the certainty of the very recent data. But it's looking, it's looking like 50%.

So if we played this podcast to a boardroom of oil executives like Haroldham and other, you know, long time U.S. energy E&P experts, how much of them would agree of what you're laying out here and where might they disagree? Gee, that's a great question. Well, I mean, we've got, I mean, Harold Hamm just recently told Bloomberg or somebody that we really need to start thinking about

what he called Tier 3 Reservoir, which is, you know, he called it the really rough rock. Scott Sheffield, who is the CEO of Pioneer Natural Resources, which just sold itself to Exxon, he said the Permian is going to peak in five years, and he said that several months ago. So my sense is that if those boardroom doors were closed tight and there was no press in the room, my senses is that Scott Sheffield and Harold Hamm would say, yeah, we pretty much agree with you. I don't know that, of course, but they wouldn't say that publicly. I know that your analysis working on this the last month or so, because we've been talking about it,

is kind of a backward looking. You're looking at the EURs and the well productivity of the last decade or so in these regions. But could you hazard a guess where that 13 million production might be in five years or 10 years or 20? years. Yeah, well, the future's tough, but my, my, I, of course, there's, there's above ground reasons and, and, you know, the, the, the geology and the oil situation is its own thing. Let's, for the moment, leave out Saudi Arabia and Iran and war and credit and financial issues just on a depletion geology standpoint. Well, but there, there is another factor that, that doesn't have anything to do with geopolitics, and that's money, capital.

And I've already set the stage for this that, I mean, I sat next to a, you know, to a mezzanine banker. You were in the same room back in January down in the Bahamas, and he kept leaning over to me and saying, yeah, nobody will lend these guys any money. Nobody wants to lend the oil companies any money. And that so so the geology is one thing, but it takes capital to drill the wells. And if we're, if we start to see the kind of thing that I anticipate, and I'll answer your question in just a second, that the production starts to decline, then the next question is, where are we going to get the money to do it? And the question that comes after that is how long will this take to correct?

And we don't know where we're going to get the money to do it right now. But I just told you that there's like a two-year lag from actual drilling to getting any oil out of the ground. Well, that assumes that you've already made the decision to drill. You've got a rig lined up. Your leases are all set to go and you have all your permits in order. So one implication from the sentence you just uttered is the amplitude of change in the next decade could be wild. because when we're faced with scarcity and shortages and a recession or worse because oil price is, it's unavailable at the quantity we want it, so the price has to go up.

That's when they send out the rigs and the investment and we're going to have to wait 18 to 24 months to get a meaningful increase. But that meaningful increase is not going to come from a snap of a finger. There's now a cap that's going to be declining. I mean, this is the real deal. slurping sound is upon us. Right. And there's, I mean, I imagine that most of the people that listen to this podcast, you know,

don't pay daily attention to the oil markets, but they're probably aware of the fact that, hey, you know, prices are lower than a lot of people, a lot of producers would like them to be right now. That's why OPEC is about to have a meeting in Vienna to figure out how much to cut so they can get prices back up. So oil prices today are, you know, in the in the low 70s. Well, it wasn't that long ago at the peak of the Ukraine invasion that they were $120. So how does oil price vary, you know, $50 over a relatively short period of time?

And the answer is that we're forever in a tug of war between, oh, my God, we need more supply. We're feeling really urgent about supply, but oh my God, oil prices have reached a level at which it's slowing down the economy, and demand is therefore weak. And then you add in the interest rates that the Federal Reserve and other central banks have had to use to get the inflation or try to get inflation under control, which, by the way, is related to oil price also. And it gets to be a very heavy and complex mix. But the dichotomy, the struggle, the fugue, if you will, is between how the economy is performing and the demand that results and the urgency of supply, which needs higher price. And the two are always in conflict and just about the time that we think we're making

progress on getting wells drilled, sentiment turns really sour. And the market says, oh, my God, demand is weak. You know, we got to stop drilling wells. And I'm not. And I'm I know very credible analysts right now who think that oil price is going to stay around $80 for the next two or three years. Now, that seems difficult for me to accept, but that's what they say. So getting back to the, can you give us like a best case, medium case and worst case, given the implications of what you're saying here? And I'll point out that if you're right about this, the geology. all of a sudden perhaps becomes the least important aspect, because if this is recognized and the reality unfolds,

then it opens up a huge sort of systemic can of worms in the world. It certainly does. And looking at the world, my best case, I would be very surprised if oil production, production increases in the next, say, six months or into 2024, my guess is that it will increase very, very slowly and essentially be on a plateau and then start declining often to the future. And by 2040 or 2050, I would not be surprised if production were 20% lower than it is today. And I'm not basing that off of, you know, the kinds of peak demand, kinds of concerns that, oh, we're all going to be driving electric cars. And I'm not basing it on that at all. I'm basing that on my sense of a combination of the geology, the commercially available, low-hanging fruit, if you will, and there's very little of that. And the finance side, the capital side that says, okay,

okay, if we need more oil, here's the money, let's go after it. I'm very, very concerned that the second part is not there. It's just not there. Well, one of the reasons it's not there is because of the next question I'm going to ask you, a lot of the followers of this podcast, which I'm quite proud of, have a value system beyond the human sphere, and they deeply care about the natural world and the sink capacity of our biosphere and our oceans.

And they might be listening to you saying this is, good news. This is all good news except for what you just said, because if we're only down 20 or 30% in oil in the next 10 or 20 years, we need to be down 100%. What do you think about all that? Well, if you're down 20% on blood oxygen, you might be dead, is what I think about that.

Now, I'm in that camp, Nate. I mean, I'm totally in the camp that says that we need to decrease our consumption of all energy, not just fossil fuels, but particularly fossil fuels. And we need to do that in order to stop destroying the ecosystem of the planet from which we get all our wealth. You know, it's, it's, it's, it's, it's, it's, it's, is, is certainly a lot of this, because I, I, I love nature. But on a purely pragmatic basis, I mean, if we continue to destroy the ecosystem on which

the entire food chain, ours included, you know, if, if, if we are destroying it, then we are, we are going to destroy our, our own prosperity, our own so-called human flourishing, if you will, to, to use an expression that that's kind of in common use out there, that we cannot separate ourselves, our fate, our prosperity from that of the planet. But the concern that I have, and I know that you share, is that our entire society's metabolism is based on an oil economy. And if we, if we, if we stop that supply too quickly, then things collapse. I mean, and that results in in levels of, of, of, of chaos and, uh, social and civic disorder, governance problems, geopolitical strife that, that just makes life almost impossible. So the people that want to get off oil, I'm with you 100% in an ideal world. I'd like to get off oil, too.

but not at the cost, you know, of having, you know, the Frankenstein mob outside my house wanting to, you know, to come in and take everything I have. And I don't think anybody wants that. It's a very difficult balance to try to, to try to maintain between being able to carry on a life that has any quality to it and also not destroying the planet. I don't know what the answer is. My guess is that we're not going to get a lot of choice in how that answer unfolds. We're going to have to live with what happens. So you're kind of calling peak oil as likely 2018 to now plateau with a decline in the coming years. I am. What about shale plays, tight oil plays, Arctic plays. You mentioned it briefly on a prior podcast, but could you briefly recap why the U.S. experiment is unlikely to be repeated as a global extension of oil supply in the coming

decade? Sure. There are a lot of overlapping spheres that have to be considered. Yeah, there's a ton of shale in the world, but only marine shale. and this is purely empirical, only marine shale has ever worked for a tight oil play. And of that marine shale, you know, let's just for arguments sake, let's say 25% of the shale in the world is marine shale. Of that marine shale, you know, some of it is uncooked like what we just talked about in Colorado and Utah. So if we take what percent of that marine shale has been buried deeply enough, has experienced enough heat and pressure to generate the petroleum, you know, maybe we're talking 25 percent of that.

Now, of that, how much remains buried at a depth that has enough pressure to be produced by some means fracking or whatever to the surface? and just for argument's sake, let's say, 25% of that. And of that, how much of it is in an area in which we can actually access and drill that we're not in the middle of New York City or the Grand Canyon or at 30,000 feet or, you know, and then we layer into that that very few parts of the world have a fiscal system. in which the owner of the land actually gets paid for having somebody produce the oil under his land. That's a very unique situation to the United States, Canada, Argentina, and a handful of other countries.

In most parts of the world, a rig moves on to your property and you don't get squat in return, and therefore people say, no, we're not going to allow that. So you take all those overlapping spheres and say, well, where is all the overlap occurring? And the answer is we've already identified most of those places. They're in North America. They're in parts of Argentina. There are areas in Russia that seem to fit that comparison. There are very few places that actually meet all those overlapping criteria for shale. The Arctic, I mean, that's a whole other, that's a whole other rabbit hole of

cost and expense and geopolitical conflict. And, you know, when I, when people say Arctic, I'm thinking, okay, best case scenario, we might start producing something up there in 25 years. That's a really best case. So if, you know, people who think, oh, well, we're just going to make it happen. No, I mean, we've got territorial disputes. It's between, you know, between Russia, the United States, China. I mean, that's so far removed that it's a future possibility, but it's not going to meet our urgent needs in any kind of reasonable time period. I know you're not an expert on this, and I don't know of any experts on this,

but how could artificial intelligence change the story that you've laid out here? Right. And you're correct. I'm not an expert on artificial intelligence. I'd like to say that for all the reading I've done, I should be, but I'm not, because this is a really hard thing to know if you're not on the inside, and I'm not. But artificial intelligence is not going to change the geology of planet Earth. artificial intelligence is most likely to change in a good way or in a commercial way, the technology that we use to produce the oil and natural gas and, you know, God knows what else, you know, lithium. So an even larger straw, perhaps. Yeah, a larger straw. And ideally, you would think that artificial intelligence would help us make better decisions. Perhaps decisions, you know, not to drill wells 300 feet apart when our best

science tells us it should be 1,000. But we knew that. We already knew that and we did it anyway. But, but, you know, so, so to me, there, the idea that artificial intelligence is, is going to find ways of, of, of adding new reserves. I'm very skeptical of that because I think maximum empower principle. I mean, humans are very good at knowing what it is that's useful and how to find it. They don't always know how to get it in a way that makes sense. But I think we know an awful lot of that. So, AI could do a lot for technology, could do a lot for decision making. And I can't begin to say how important that is or is not. But for the leaps and bounds that I understand that, AI is making, I still suspect we're talking about many years before it actually could make a difference

in our energy supply. Now, maybe I'm wrong, but my fear is that people are going to start using it to find better ways of fighting wars or displacing humans from factory floors. But I could be, I'm probably wrong on that. Well, I don't think you're probably wrong. You might be wrong, but I don't disagree with you. So once this is all realized, five years from now, we have lower production. The Permian is past peak. There's economic crises. Knowing humans will probably blame all that on some exogenous factor and not on geology and the fact that we've used a larger straw to take out a finite resource. central to our economic institutions. But on that trajectory, I've asked you this before, and I'll ask it again, given your new

research, does it make sense for AI or some external body to coordinate the drilling in the oil that we have remaining in this country and in other countries for them in a more planned way so that we don't cannibalize and we actually increase the EUR because we're not taking someone else's pizza, as it were, under the earth. Is there a role for some sort of a coordinated strategy beyond the lots of little pincushion dots owned by different corporations? Well, there's always room and yeah, but I mean, When was the last time we ever had a coordinated effort to meet any of our needs except in wartime? I'm just not, I'd like to be more optimistic here, except that it just doesn't seem that humans are very good at that.

And if the, let's just say that the AI agreed with me, which is that the best forward strategy for humanity in the earth is for humans. to use less energy, nobody wants to do that. Well, because AI is here, but the market GDP and profits is above it in the hierarchy. So at least for now, that's not going to happen. But we already know that, though. I mean, that's my point. Yeah. I mean, and I know there are lots of people out there who will disagree with this,

but I think they disagree with it because of ideology. But, I mean, I look at the world and, you know, like you, I go around and I give talks and people say, yeah, but I mean, what's the solution? I mean, you know, you got to tell us what the solution is. And I say, the solution's easy. Use less energy. Well, they don't like that. That's not a solution to them. They want to know, well, you know, can't we use hydrogen? Isn't nuclear the solution? I mean, they want something that allows us to keep on growing the way that we have. that doesn't cause any fundamental discomfort in their lifestyle. And I just don't see that those things are compatible, that the solution is one that will create considerable, not unbearable, but considerable discomfort in our lifestyle and our economic prosperity. As you know, I agree with that.

I think there are no longer any non-radical pathways out of this. And we're going to have to use, use less, but it's the systemic implications of a peak and decline in oil that I'm focused on. This has been very enlightening. I want to ask you one final question, but is there anything that you would like to summarize and, you know, hit a harder tone on on anything you've outlined today? Probably not on anything that I've outlined. outlined, we came close to it when you asked me, do I think that our political leaders are fighting these wars right now because they're aware of what you're talking about? I don't know what

they're aware of and what they're not aware of, but I think anyone who believes that the war in Ukraine is about territorial or ideological differences between Russians and Ukrainians really needs to, well, probably needs to listen to Helen Thompson's podcast that you did a little while ago. Anyone who thinks that what's going on between Israel and Hamas right now is some secular issue that, you know, that ultimately revolves around forming a, you know, a two-state solution in Israel, I think, you know, really needs to study, well, listen to Helen again, but, you know, study the history of the Middle East and how it's fit into the geopolitics of the world since at least the beginning of the 20th century. It's all about resources and energy. All these wars

ultimately are. Well, just to put a fine point on that, we're talking about decline of U.S. production because of what you've outlined and discovered on the Permian well productivity. a reminder that two-third, half to two-thirds of the world's remaining oil reserves are within six, seven hundred miles of Israel. Yeah. Like, so there's a reason that we're over there. There has, and, and, and, and, and, and, U.S. foreign policy has always been focused on the Middle East, as has the foreign policy of the United Kingdom and France and Russia. I mean, Germany. I mean, this is not known to everyone,

but, you know, look at history and you will see it very clearly. It's not lost on anyone. So you sent me supporting slides for this conversation, which we will share, as we always do in the show notes on the main site, The Great Simplification.com. On our last podcast, I asked you what you would like to come back

on the show and discuss, and I believed you said you want to talk about renewable energy, energy properties, energy density, nuclear, and how those are not going to replace the energy quality of oil and gas. Is that still what you would like to do on our next conversation? This was a little research thing that you just came upon with Kerry King. And so I wanted to give you a podium to highlight this. What would you like to talk about next time? No, absolutely.

And not from the perspective of, oh, renewables are no good. And we need to, you know, we need to, no, it's not that at all. I think that renewables, nuclear, all these things are certainly, they are part of the energy landscape. And they will be an increasing part going forward. but I really would like a platform to explain why a lot of the popular conceptions about what they can do are going to be hugely disappointing. We cannot run this civilization on renewable energy, and I think that's important to understand because we either then have to say, well, we're going to have to continue with fossil fuels, or we're going to have to change. the kind of civilization that we live in, one or the other. Maybe there's a third option I'm not considering.

Yep. I look forward to that conversation. That will be after your trip and after my taking January off from recording. So February, March, we will have you back and continue to be energy pit bull, curious analyst trying to figure this all out. Thank you for your analysis and wisdom and insights, Art Berman. And thank you for the opportunity to have this discussion, Nate Higgins. If you enjoyed or learned from this episode of The Great Simplification,

please subscribe to us on your favorite podcast platform and visit thegreat simplification.com for more information on future releases.