Outspoken oil expert challenges common ideas

Matthew Simmons, chief executive officer of Simmons & Co. International, a Houston-based investment bank, has never been shy about challenging the conventional wisdom in the Oil Patch.

In an interview with Houston Chronicle reporter David Ivanovich, Simmons doesn’t disappoint.

Q: What’s your take on today’s $40-plus oil prices?

A: The odd thing about oil prices in the last 20 years was how unbelievably low they were, as opposed to how odd it is that oil prices are at the level they are today. That’s where I would draw a sharp distinction with most of the oil industry.

Q: What do the fundamentals look like? Are supply and demand out of whack?

A: The fundamentals, to me, look scarier than hell. Demand … is having the smell of a runaway train, downhill on a one-way track. The consensus forecast for 2004 fourth-quarter demand is 83.6 million barrels a day, an increase of over 2 million from where we are this summer. And if you look at the consensus for the fourth quarter of 2005, demand is 85.6 million barrels a day, another 2 million increase from the fourth quarter.

Q: What about supplies?

A: There are very few companies that are showing any ability to grow their global oil supplies by more than 1 or 2 percent a year. If you take all the announced projects of any significance, and if they all come on and peak in the first year, they account for