06 March 2006
By ANDREW JANES
Long-addicted to cheap abundant Middle East oil, the United States – and the rest of the world – may soon have to go on the methadone programme.
That is the message from American oil industry insider Matthew Simmons, who is in New Zealand to speak at Crown Minerals' 2006 Petroleum Conference, which starts today.
Mr Simmons is the founder, chairman and chief executive of Simmons and Co, an investment bank specialising in the oil industry, which counts Halliburton, General Electric and the World Bank among its clients. He served as an energy adviser on the Bush-Cheney 2000 presidential campaign and most recently caused a stir in energy circles with his book – Twilight in the Desert – The Coming Saudi Oil Shock and the World Economy, published last year.
His basic thesis, which he came to after poring over thousands of pages of technical reports, is that some of the world's largest oil fields are running out a lot quicker than what he calls the "infinitely smug" forecasts coming out of organisations such as the International Energy Agency suggest.
In his book Mr Simmons predicts that the price of a barrel of oil (currently about $US60) will be in the high triple digits within a few years. And he is willing to put his money where his mouth his, making a highly public $US5000 bet with a New York Times columnist that oil prices will be at $US200 a barrel by 2010.
"I'm not sure about the exact date but it's well within the realms of possibility," Mr Simmons says.
"I wouldn't have just said that for the publicity."
Simmons says that more than 30 years running Simmons and Co has made him a highly cynical observer of conventional wisdom in the oil and gas industry.
He kept wondering how energy industry analysts could come up with such specific predictions about how much oil could be produced when most of the data on the fields was kept secret by the large oil companies.
"This is an industry that's being run by anecdote."
One of the main things Simmons calls for in his book is energy data reform – requiring the oil majors, including Saudi Arabia's state-owned oil company Saudi Aramco, to provide quarterly reports on all of their oil fields.
But unlike many in the peak oil movement – who predict a doomsday scenario of economic collapse and wars over scarce resources – Mr Simmons is optimistic that the world will figure out ways to deal with permanently high oil prices.
"I think we are primarily going to figure out how to use a lot less energy through changes in the way we distribute goods over long distances and by letting more people work from where they want."
He says he is still close to the Bush administration and recently met US Secretary of Energy Sam Bodman, whom he says is taking the issue seriously.
And he describes President George Bush's State of the Union speech in January, in which Mr Bush talked of breaking America's addiction to oil and ramping up investment in alternative energy, as "one of the really great turning points in America's history".
"I think the message of breaking our addiction to oil is one that we are going to hear a lot more of from Bush and whoever replaces him."
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