The Great Simplification with Nate Hagens - Peak Oil, Ponzi Pyramids, and Planetary Boundaries

Episode Date: October 3, 2025

To view the graphs Nate is referring to in this episode, please click here. --- In this week's Frankly, Nate returns from New York City Climate Week with fresh reflections on the disconnect between our economic narratives and biophysical realities. Using his background in finance, Nate observes that while the prioritization of financial abstractions and claims continue to accelerate, with gold and silver prices reaching record-setting highs, the ledger is being balanced with parallel declines in our planetary health and social resilience. This tradeoff is harder and harder to ignore as newly crossed planetary boundaries continue alerting us to the fact that we are operating outside of our Earth's ability to maintain biospheric stability. Nate also gives an update on Peak Oil, drawing on the International Energy Agency's recent report regarding the implications of oil and gas field decline rates. He emphasizes that the question at hand is not if these energetic supply constraints will affect the trajectory of human systems – rather, the question is when it will come into effect, and how we will respond as a human species. Given the increasing number of reports on declining oil forecasts, how much longer can our society remain energy-blind? Where might our priorities shift if we truly understood the biophysical limits shaping our future? Lastly, if we were to zoom out towards a wider boundary lens, what types of societal responses become possible that could steer us towards better human and planetary futures?  (Recorded September 30, 2025)   Show Notes and More Watch this video episode on YouTube   Want to learn the broad overview of The Great Simplification in 30 minutes? Watch our Animated Movie.   ---   Support The Institute for the Study of Energy and Our Future   Join our Substack newsletter   Join our Hylo channel and connect with other listeners

Good morning. I am back from Climate Week in New York City, Gotham. I had some amazing podcast there on terror management theory and geoengineering and climate and CO2 is a story of life. Please tune in the next month. There's some really great ones. It's always strange when I go back to New York City. I used to work there. on Wall Street, the beating heart of the global economic superorganism. And so today I just want to share some things I've learned in the last week and the juxtaposition of the global economic financial situation with the global planetary ecological situation. It's almost like a twilight zone episode that we are living.

but also amazing, fascinating, and motivating to play a role in. So one of the people I met with complimented me on this graph that we've shown a few times, showing the hierarchy of human decision making. This isn't the hierarchy of what the median human cares about. On the contrary, the median human cares about the things that are lowest on this hierarchy, which is the environment and the well-being of our citizens. But the way that power in our system manifests this hierarchy, this pyramid has AI and access that supports it at the top, and military and the currency markets and economic growth and

energy and politics, etc. And giving I was in New York City, it made me think of the Exeter pyramid, which is a financial concept named after a Fed economist named Exeter, that shows a pyramid of various financial markers of wealth. And during financial crises, there's a flight to quality where wealth tries to flow down this pyramid towards safer, more tangible assets. But the pyramid is inverted because there's vastly more wealth in derivatives and claims on claims on financial things at the top.

Then there are physical things at the bottom like gold. So when the panic sets in, everything can't fit through the narrow base. It's a powerful framework, which we see manifesting today. with gold and silver, making new daily highs. Silver's up 50% this year. Gold is approaching $4,000 an ounce. It's a useful framework for thinking about systemic financial risk and why gold bugs view precious metals as the ultimate safe haven when trust in the financial system erodes. However, this entire thing views the financial system as the whole system. And so, Kelsupri's long-term viewers of this platform will recognize that using a wider boundary

lens, the biophysical extra pyramid looks even wilder. Money and credit are just claims. When you spend a dollar, it's ultimately spent on something containing energy and materials, which means all higher financial layers. on top of the throughput of fuels, oars, soils, water, and oxygen cycling. A single barrel of oil may do the 10 years of human work. So if you remove affordable power and the whole stack shrinks, regardless of interest rates or the value of gold.

So in a wide boundary sense, below gold then are the unprice foundations of our financial accounts, which ignore ecosystems that make oxygen, buffer water, build soil, and host biodiversity services, which our economy treats as free until they're damaged or impaired, at which point the pyramid doesn't just wobble, it implodes. So our culture is energy blind and ecology blind. We mistake the rising financial claims in our world for rising real wealth. even as the superorganism burns through its four hidden subsidies, energy credit, complexity, and human trust.

And when those physical supports tighten, paper promises will cascade down towards the real floor, energy, materials, basic needs, and functioning natural ecosystems. So I think we need to popularize a wide boundary, extra. pyramid. And part of that is, as most of you know, oil. And let me give you an update of oil courtesy of the International Energy Agency, which last week had a refreshing for them report out on world oil data and situation, which if you didn't know the author, you might think that it was me or one of my colleagues like Art Berman or such, because the IEA for a long time has kind of been the cheerleader for a lower carbon, more renewable energy future, along with

continued economic growth. And I'm just going to scroll through a few of the charts from this report. Here we're looking at the oil production by type for the last 25 years. The low part, the dark blue, is conventional crude oil onshore. The light blue is shallow water conventional crude and the turquoise sliver is deep water conventional crude. On top of that is natural gats liquids. And as far as I can tell, the IEA lumps least condensate into this, which makes no sense because they shouldn't be lumped together. The condensate should be part of crude oil, which are Berman and other graphs that I show here usually shows. And then above that is tight oil, extra heavy oil and other biofuels and other things like that.

We can see here that conventional oil has been on a flat today. declining plateau for a long time. And what is real oil, remember the stuff in green, often has 50% of the BTU content of a barrel of oil, and a lot of it is ethane and isn't even used for diesel and asphalt and gasoline. It's used to make plastic bags. So increasingly, what's growing is things that in the past we didn't consider oil. In fact, if you look at the accompanying chart on the right, it shows what has grown during the five-year periods of the last 25 years. And what's real oil shown in the light blue and the dark blue is actually declining. And we're adding less good things on top.

How does this shake up globally? The graph on the left shows OPEC and Russia, basically flat. the last 20 years. And the graph on the right shows the countries that are growing. But it's a misleading graph because the bottom part, the dark red, is the United States, which includes light-tight oil or shale oil. If they had put the United States a little section on top of this graph, all the other ones would have been flat to declining in this.

So it's misleading. And again, a lot of this isn't really oil. Here's another graph that 20 years ago when I was overseeing the oil drum, we talked a lot about. In order to burn oil, you need to extract it. In order to extract it, you need to find it. And this shows how much discovery there is of oil and gas from the decade of the 60s, the 70s, the 80s, and all the way to now, we're finding much less oil, Kelsupri, We found the best first, and now there's a lot left, but it's smaller, more costly, more difficult to find.

And many of it, the places it's located are in places that don't like the United States or the global north much. So this graph, I've shown variations of it since 2012 were my friend Rune-Lickverne, the oil drum coined the term, the Red Queen. which is we have to run faster and faster just to stay in place. But what this shows, the alternating shades of blue, show all the wells in the United States that were drilled in that year, how rapidly they decline. And then you stack that on top of the decline of previous wells that were drilled. And as you see, obviously we haven't surpassed 2025 yet.

yet, but as we are at 2025, if we drilled no more in the future, that is how quickly all these wells would decline. And a similar dynamic exists for gas. So what this means then globally and Exxon had a similar chart in their recent annual report is the natural decline rate of global. conventional in dark blue and unconventional shown in the light blue. If we did nothing, this is what would happen to all the existing oil production in the world. We would go from roughly 100 million barrels a day to around 16 million barrels a day in the next 25 years. Obviously, this would have unbelievably massive implications for the global economy and beyond. However, there are things that we add into that.

We add projects that are approved but not yet drilled. So they've got financial approval. And out to 2050, this is those projects around the world and in various continents. They add up to 8 million barrels a day, declining down to 2 million barrels a day with that additional production. So in this graph, that is the stacked areas in the red and the blue on top of the light blue. And then we have other potential approved and unconventional projects that are on the horizon. But there's a massive gap, even between this scenario and what is expected to be needed and demanded in the world. And briefly, the concept of peak oil was originally just focused on the

supply of oil in the world based on geology. It's a finite substance. It took millions to tens of millions of years to form. We're drawing it down in 150 years. What took 10 million years to sequester? It's finite. So there's a supply issue. There's also peak demand, which I never really subscribe to, which is the Stone Age didn't end for lack of stones and the oil age will end because we drive electric cars or we need something else other than oil. I find that very fanciful because one barrel of oil does 10 years of my work when combined with a machine. That's indistinguishable for magic. We don't likely walk away from such fossil pixie dust. I actually think peak affordability is a much more important concept, which is if we're in a recession and all the prices go down and oil is $40 a barrel,

demand and affordability will go down below that because people won't be able to afford the GI Joe with the Kung Fu grip or the Chevy Chase vacation to Disneyland. And affordability will go down more than oil production. And then that will create a positive feedback loop in a negative sense because at $40 oil, the United States won't be drilling for more oil. We need higher and higher prices to access the dregs or the things near the source rock. So this is all to say the IEA, without a. any fanfare and frankly without even using their own graphs, they're using Ristead energy graphs, is painting a picture of supply constraints and we're going to need massive investment in the world into oil and gas infrastructure to avoid steep declines. So the other thing I want to comment

about peaks generally is we show, at least back in the day in the peak oil community, these symmetrical curves that show the upslope and the downslope as if it's a normal curve. But we have to remember that these curves are geological forecasts, but the downslope of anything is a socioeconomic political event. So once we're past peak in a central resource, We're in uncharted territory where human systems will matter way more than geology. Picoil graphs are really just suggesting to us the date when we lose control of the narrative. The upslope was written by geology and economics, and the downslope will be written by crisis

management or mismanagement. And we can see, we don't, you know, here's the other thing. 20 years ago, when we were writing on the oil drum, we got some things wrong. There were a lot of shrill voices that were calling for calamity as soon as the date of peak oil was reached. But a lot of people in our culture were talking about oil and oil depletion and the centrality of oil to our lifestyles. Now it's like crickets. And everyone I know in the oil industry takes it for granted that oil is peaking now. or in the new future, the United States is likely already peaked permanently.

We had 13.6 or 7 million barrels and now we're down to 13.2. And we need 50 or $60 dollar a barrel oil just at a bare minimum to keep drilling. And all of a sudden it snuck up on us that we're in the midst of the, I mean, technically the date of peak oil so far is still November 2018 for almost seven years beyond that. that kind of bumping around adding ethane and plastic bags and other things to the total. But we're generally there. And the larger point is Russia, China, Saudi Arabia, the CIA, you know, these entities are well aware of the game theory of the master resource.

And so look at what's happening in the world in the Middle East. in Ukraine and Russia, choosing sides with bricks and alternative currency systems. These are all in response to a growing but not publicly acknowledged recognition of limits and how are we going to, who's going to control what's left on the downslope. I've joked, but not really joked about the concept of draining America first. that a wise country would print money, keep their oil in the ground, and use the money to buy other people's oil. How long is it before some nations start to do that?

Start to recognize how important this resource is to the way the world works today and the scale and magnitude of our system and throttling down their internal production to save for a rainy day because oil in today's world is very much is power. So last but not least, I was in New York. And I didn't do another podcast with Johann Raqshund because he was too busy, but he announced in the planetary health check that we have exceeded a seventh of the nine planetary boundaries. We've already exceeded novel entities, which is plastics, endocrine-disrupting chemicals that are as deep as the Marianas Trench and found on the North Pole. We have a teaspoon of plastic in our brains, et cetera.

There's climate change. There's a CO2 concentration and also the radiative forcing of making things warmer. There's biosphere integrity. There's land system change. There's freshwater change. There's the biogeochemical flows of phosphorus and nitrogen, but now we've breached the ocean acidification limit. And I'm sure this stuff is, there's not like an actual physical. Yeah, in April 3rd, we breached the planetary boundary on ocean acidification.

But the oceans have absorbed around 30% of the carbon dioxide that we've emitted, and they've become 30% more acidic. They've also absorbed about 90% of the warming. So as we hit all-time highs in the financial markets, all-time highs in silver and gold, we are hitting all-time lows in the functioning and the stability of our global ecosystems. And I found it fascinating to be in New York where my people, the people that are studying and concerned about ecology, future generations, other species, deep time and earth, we're just laser focused on what do we do and the crisis that we're in from the ecological perspective, including one gentleman who's an expert on geoengineering thinks it's 90% likely

that in some form we will send up 24-7 airplanes into the sky spraying sulfur perpetually just to bias time functioning as Mount Pinatubo volcano with the sulfur dimming effect. I don't subscribe to that, but I think it's plausibly correct that we will be forced to do that when we see things unravel so much on the warming front. So this is a little bit of a grab bag of things that I've been in my working, RAM this past week. They're all connected. We're all connected. And it is my hope that normalizing these conversations result in some unknown responses in the future. Peek oil's here. Planetary boundaries are being exceeded. After basic needs, the best things in life are free. More to say very soon.

all well.