A World-Changing Event: We're Not Going Back to January 2026 with Art Berman

Art Berman (0:00)

This is a world-changing event, whether it's oil, whether it's LNG, whether it's fertilizer, food, geopolitics, currency, finance. We don't have an infinite pot of resources, and the winner are the ones that have the most access to it. And by the way, World Wars I and II were won and lost on the basis of availability of oil. We are not going back to January, 2026

And at some point, we are going to see a version of what happened after the first oil shocks. This is not going to play like that movie did.

Nate Hagens (0:39)

You're listening to The Great Simplification. I'm Nate Hagens. On this show, we describe how energy, the economy, the environment and human behavior all fit together and what it might mean for our future. By sharing insights from global thinkers, we hope to inform and inspire more humans to play emergent roles in the coming Great Simplification.

Today, I'm joined by long-time TGS guest, Art Berman, for a wide boundary update on the geopolitical and energy situation surrounding the Middle East and the Strait of Hormuz. Looking beyond the chaos of the day-to-day events towards the longer-term impacts for the supply and circulation of oil, gas, and other critical materials. Art Berman is a petroleum geologist with over 40 years of oil and gas industry experience. He is an expert on US shale plays and is currently consulting for many E&P companies and capital groups in the energy sector. In this conversation, Art and I dig into the buffers that have kept some parts of the system afloat, even while others have already begun to feel the pain of expensive oil and natural gas prices. More importantly, Art explains that while these buffers prevented some of the most immediate consequences that many analysts warned about, the resilience in the system is now quickly wearing thin, leaving us on the precipice of the largest energy shock we've ever seen, with almost no slack left unless things change. All the while, the power lines of geopolitics are rearranging as countries realign themselves with the materials and resources and protection they'll need amidst an uncertain and rapidly changing world. These are interesting but serious times that we live in, and no one human can carry it all. I appreciate each of you continuing to tune in and learn what's happening in our world alongside me and my guests. With that, please welcome Art Berman.

Arthur Berman, welcome back to The Great Simplification. How are you?

Art Berman (3:12)

I'm well, Nate. Good to see you again.

Nate Hagens (3:14)

Good to see you. It's been a minute. So last you were on in May, I believe, and now we are timestamped. This is Saturday, September 19th.

Lots to discuss, lots going on in the world, lots of things you speculated about that are coming true in our last conversation. Let's start super broad. What is the US-Israel-Iran war revealing about the condition of our larger global economic system?

Art Berman (3:50)

What this is revealing is that we cannot run and we cannot hide from a system which is completely dependent on increasing flows and increasing rate of growth in energy supply, and yet has had a decreasing rate of growth in energy supply since the late 1960s. So the world has been using all sorts of very clever means of adapting to that underlying fundamental problem now for more than 50 years, and pretending or hoping that it'll all be okay.

And what the Iran War has done is kind of ripped the band aid off of that, and just show how fundamentally dependent we are on ever-increasing energy growth. And you suddenly remove, let's just say, 10 million barrels a day almost overnight, and it just reveals just how incredibly unprepared we are for a blow like that, much less just the ongoing status quo.

Nate Hagens (5:14)

You said that the amount of energy we have continues to grow year by year, with the exception of 2008 and 2020, but that the rate of growth peaked in the late 60s and 70s, and has been in decline ever since, which I think is an important thing to note. Is that coincidence that the same thing is true with population and population growth rates?

Art Berman (5:43)

Yeah, so there's so many things here. First of all, we have a global system, a civilization, that requires enormous stocks and flows of energy. And whether we like it or not or prefer it, 80% of that is still fossil fuels. And oil is by far the most important component of the fossil fuel category. And so all of our ingenuity and innovation and technology, it looks like we're getting farther and farther ahead. But the part that's unseen is that every technology and every innovation requires increasingly more energy to support it.