September 2004

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With oil prices reaching an anguish-provoking $49/barrel or so last month, it could be you ain’t heard nothing yet: How does $182 a barrel grab you? That’s the number Matt Simmons, head and founder of an internationally respected 30-year old energy investment bank, Simmons & Company International, Houston, has been throwing out in some recent presentations, including at a late-May conference on the study of peak oil in Berlin, according to an opinion piece on energy security in the Aug. 23 on-line version of India’s “Business Line,” the financial daily of “The Hindu.” The story said this group, the Association for the Study of Peak Oil (ASPO), felt the current increase in crude oil prices is “only a foretaste of worse to come.” However, in a phone interview with H&FCL, Simmons qualified this shocking number by saying this is a price level required to meet the severe financial needs of a host of competing global issues. One of them is to accommodate the prosperity aspirations of OPEC’s poorer populations as well as people in developing countries on the margins of Europe and elsewhere. Another is the need to modernize the increasingly creaky global oil industry infrastructure - from exploration to transport to processing. At the same time there should be a fair return of, say, 10% on investment. “You can’t do all this for less than $100 a barrel,” says Simmons, adding he has “no idea” when, if ever, those price levels might become reality. But, the fact is “that we’re finishing up one of the most unbelievable eras of illusory (oil) prices,” Simmons maintains. The “Business Line” article also said ASPO thinks this $182 figure is “realistic.” It said it is based on calculations by Dr. Colin Campbell, former executive vice president of TotalFinaElf and a prominent student of international oil economics. The article also asserted that the chief economist of the International Energy Agency, Fatih Birol, who was at that conference, admitted in private that these fears are real. In a separate interview in the Aug. 1 issue of “Petroleum News,” Simmons was quoted as saying that Saudi Arabia’s giant oil fields have already peaked and could start into a rapid decline as early as three years from now. He says no other country could make up the shortfall, and alternative fuels can’t do it either, nor can nuclear power. “This could become the biggest energy issue the world has ever faced,” Simmons told “Petroleum News.” Bottom line of the Indian “Business Line” Opinion piece: “The time has come for the country to commit itself to developing an alternative fuel, like hydrogen.” (Sources: www.thehindubusinessline.com/2004/08/23
/stories/2004082300770900.htm; www.petroleumnews.com)