Peak Oil News: The Last Great Energy Illusion?

Monday, December 26, 2005

The Last Great Energy Illusion?


By EV World

'Twilight in the Desert' author, Matthew Simmons’ address to ASPO oil conference in Denver.

Few people have done more to coax a complacent, energy-voracious world out of its self-induced stupor than Matthew Simmons.

A successful energy industry investment banker from Houston who once advised the Bush campaign in 2000, Simmons is the Saul of Peak Oil. His transformation from oil and gas project financier to peak oil apostle didn't occur during a blinding encounter on the road to old Damascus, but over weeks and months of reflection and research on comments he'd heard during an oil industry conference on the Persian Gulf several years ago.

And like nascent Christianity in the first century, the Peak Oil movement has been growing slowly, but steadily, which Simmons briefly recounted in his opening remarks to the several hundred attendees at the first meeting of the United States chapter of the Association for the Study of Peak Oil in Denver, Colorado. He noted that there were just 45 "odd" people who met for the first conference in Upsala, Sweden some four years ago. By last year's meeting in Lisbon, Portugal, attendance had grown to several hundred, including 10 film documentary crews. It was decided at that meeting to found ASPO-USA.

Simmons, who stands maybe 5' 5" and has the ruddy complexion of an English schoolboy, placed the purpose of the Denver meeting in its context by observing that the "issue, basically, is pretty simple: Is peak oil real and if it is, is it important?"

He pointed out that despite being five years into the new century, "we've not had a crisis yet," curiously ignoring the 'war on terror' or the invasion of Iraq'.

"So, this might actually be the first crisis of the Twenty-first Century".

To answer the question of will peak oil be the first major crisis of the new century, Simmons asked rhetorically, "Does the twenty-first century need abundant energy growth? And second, can this growth be met by technology and hard work? And if not... if for some reason technology and hard work fail to create more energy, will demand for more energy understand and not grow anymore, or could a gap between demand and supply morph into what is commonly called a crisis?"

Simmons explained to the gathering of energy industry experts, government policy makers, environmentalists and the media, what he means by the word "crisis".

"A crisis, through all the ones we've every had, is basically a series of problems that we ignored until they combined to become terminal".

He pointed out that the twentieth century was the "greatest century of enlightenment and innovation ever. Unfortunately, the twentieth century was also marked by unintended problems that became awful crises."

These included four major crises: "The Great War (WWI) and its non-resolution", the unregulated economic excesses of the "Roaring Twenties that morphed into the Great Depression", the "Peace in Our Time movement that basically became World War Two", and finally the well-intentioned socialist revolution that was derailed by the Bolsheviks and was then hijacked by communist thugs like Stalin and Mao who caused the death of 100 million people.

"If it weren't for those four crises the Twentieth Century would have been the greatest century of enlightenment and innovation. But those four crises along occupied about sixty percent of those one hundred years. And we basically, actually, didn't understand any of them.

"So would reaching peak oil create another one of these crises? If the world passes peak oil and very importantly, natural gas, is this crisis or a surprise? Well, if demand peaks, it's a surprise. But if demand continues to grow, it's a crisis.

"The reason it's a crisis is really simple; if the world needs a hundred units and the supply is only sixty units, then prices go way up, disappointment sets in and rationing becomes mandatory, because when you don't have a hundred units, you can only use sixty.

"Will peak oil and gas happen," he asked?

"The answer is no... if neither turn out to be finite", as proponents of abiogenic oil contend. It is obvious that Simmons holds little respect for the theory of self-replenishing oil -- which he discussed with EV World's editor after his address -- or for what he calls "conceptual reserves", which are oil deposits that economists -- not petroleum geologists -- believe exist but haven't yet been found despite extensive exploration around the planet.

With obvious tongue-in-cheek, he said that he doesn't see peak oil occurring IF the world curbs demand or if all those conceptual reserves, in fact, actually become proven and economically extractable.

"We have a lot of prominent people right now who are flinging around unbelievable conceptual reserves, including the USGS office here in Denver. Or (ExxonMobil president) Rex Tillerson at the World Energy Congress in Johannesburg (South Africa) who said the world has three trillion barrels of recoverable reserves, two trillion conventional, one trillion unconventional, but since that's an estimate, it might be conservative; it could be seven trillion. Or Saudi oil minister Ali al-Naimi who says we have two hundred billion barrels of reserve that we're soon going to discover".

That remark brought a knowing chuckle from the audience because how can you know the size of an oil field before you've even discovered it?

For Simmons, then the answer to the question of will peak oil occur is a resounding, yes! if demand continues to rise and conceptual reserves remain just that, conceptual rather than actual.

"Peaking is actually a fact. It is not a concept", he stated. "All finite resources, unfortunately, have their limits to growth, and the faster a resources is used, the sooner its use peaks. Peaking, categorically doesn't mean running out. Peaking means further growth is over. The difference between peak oil and running out is as profound as me saying, I am getting a tiny bit hungry and I am about to starve to death. Or I sneezed, I might have cold or I am in the last stages of a terminal disease."

"I think it is important that the scoffers of peak oil stop saying we'll never run out, and understand that when you peak, you've peaked."

For Simmons, peak oil doesn't mean the end of oil, but the end of the growth of oil production, where year-after-year, the world could expect to pump more from the ground that the previous year. Peak oil is the opposite side of that growth curve, one which can be managed if we can cause demand through greater end-use efficiency, resource conservation and fuel substitution to match, year-on-year, the decline in oil and gas production.

In this 45-minute presentation, Simmons explains in more detail the concept of peak oil and gas in terms of what the French Petroleum Institute refers to as the "royal family" of oil fields: the gigantic "king" field, one or two"queens" and an six to ten "lords" as illustrated by both the oil fields of Saudi Arabia and the North Sea.

"After that, you've not run out of things to discover, but they're just little, small pools."

And the sobering fact is, that all of the known "royal families" around the globe, which were originally found decades ago, are now aging and going into decline; just at a time when global demand is escalating due to economic growth in China and India.

Near the conclusion of his luncheon speech, Simmons conceded that maybe Middle East oil reserve estimates made in the 1980s might have been good guesses.

"Undiscovered Middle East oil might be found," he said, "but this also might be the last great energy illusion."

The central question is, should the world continue gamble its future on the unknown and possibly unknowable?

You can listen to Mr. Simmon's complete presentation using the Flash-based MP3 Player above or by downloading it to your computer hard drive for playback on your favorite MP3 device.

EV World expresses its thanks to ASPO USA, Steve Andrews and Randy Udall for granting us permission to attend and record this historic event. The next conference will be held in Boston, Massachusetts in 2006.


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