The maturation of Matt Simmons

It does not take long for people who study peak oil to see some heavy implications of the end of abundant oil. After a while some of the more realistic probabilities become clear and often become one’s main topic of conversation. The possibilities, dangers and opportunities start motivating one to change his or her life.

But it takes more than the few years that most students of peak oil today have under their belts for the stark picture to come into clear focus. It helps if one has grounding in the petroleum industry, but it’s all too rare; people in extractive industries seldom seem to show they care for the greater welfare of the world. And those who don’t want to believe there is now – or soon will be – an historic crisis regarding the peaking of world oil extraction are often 100% wedded to the status quo. It is left, then, for many a non petroleum professional to hold forth and help lead us.

However, Matthew R. Simmons, Chairman of the energy-industry investment banking firm Simmons & Company International, stepped forward and has recently become a phenomenon for our times.
Matt Simmons is a man who has reflected on the waste of energy that ordinarily would be delightful for any businessman in energy. But he wryly complains of “blueberries in Maine imported from Chile even during blueberry season.” Likewise for the nation’s infrastructure: “You can tear up the roads,” he said, to stop the wasteful trucking and start barging on water, to save 35 times as much energy. He mentions rail also as a major replacement for our highways, as freight by rail saves 8 times the energy. He would know, however, that today’s volume of trade cannot fit on existing railcars and barges, and that there’s little likelihood that the nation’s infrastructure can change quickly enough for the peak oil timetable.

And when is peak? “Realistically, we’re probably at peak now. If not, production will fall faster later” as a result of rising demand. This definitive conclusion is from a data specialist on the main assets of the petroleum industry: reserves and the whole industry’s ability to extract, refine and distribute at a profit. He is not surprised that peak is here, nor that we are caught unprepared. He offers his audiences instances of the public and leaders ignoring past warnings, such as M. King Hubbert’s on the peaking of domestic and global oil extraction.

How did oil analysts and the government get caught with their pants down? “Price volatility masked price signals.” People were and are expected to trust samples for oil reserves, but he has seen “no proof that reserves still grow.” There has been “only a theoretical 1.5 million barrel a day production cushion” to last three years. But the spare refining capacity is not there: if there is, it’s only for light, sweet crude that’s dwindling fastest. “The best Saudi oil is gone… Middle East production will go down by one third by 2012.” He reported that an Occidental Petroleum official told him that they’re in the business of producing “brine stained with oil.” Saudi Arabia has been depleting its precious fresh water by pumping it into its aging oil fields, and this has meant using more and more salt water to the detriment of the fields and the equipment.

Energy Bulletin