Oil Firms ‘In Liquidation,’ Says Simmons

The “peak oil” debate continued to rage with one of its principal proponents, energy sector investment banker Matthew Simmons, appearing on CNBC Tuesday to insist that major oil firms are “actually in liquidation.”

Simmons’ assessment of major oil companies’ fate is the “grim reality,” he says, of the firms even as they insist that vast potential remains from unconventional sources. Among those untapped reserves are the “tar sands” or “oil sands” of Canada — naturally occurring mixtures of earth, water and oil found largely in Alberta.
All major oil firms, he said, are “overlooking the fact that they are actually in liquidation, their production has been in decline for several years [and] no matter how much money they intend to spend, they just can’t get ahead of their [production] decline curves. And their proven reserves are shrinking very rapidly.”

Surging demand, especially from developing countries, point to an arc of higher energy prices, he added.

“Unless we have a very severe meltdown in the global economy, I think we would be better off assuming that China and India are going to lead the way of the developing countries starting to behave more and more like Japan did in the ’50s and ’60s,” he said. (See Simmons’ interview in the CNBC video at left.)

“If that happens, then we need to be prepared for for one of two things: either bringing on supply to the tune of a new North Sea every two or three years — which is impossible — or watching demand outstrip supply. And finally we [will] create shortages that literally create a run on the energy bank, just like we had a run on Bear Stearns.”

CBNC