Interview: Matt Simmons

Matt Simmons, July 2010. Photo: Courtesey of the Ocean Energy Institute.

Matt Simmons, July 2010. Photo: Ocean Energy Institute.

When we hatched the idea this summer of starting Transition Voice as the first online magazine devoted to regular coverage of peak oil, we knew immediately that Matt Simmons was the first expert we wanted to interview. Those familiar with the subject will know why.

That’s why we were so glad when Simmons took a chance on our fledgling effort, and agreed to talk to us for our first issue. We spoke by phone with Matt in late July from his newly formed Ocean Energy Institute in Maine, where he was now putting his intellectual capital and investment strategies to work in an effort to develop and unleash ocean power.

But as it turned out, it was one of the last interviews he gave. Matt died about a week later, on August 8, 2010.

We’re grateful now to share some of his final words with the public, and help to re-examine his record as a peak oil prognosticator, at least as we understand it.

For those new to the issue, Matt Simmons was so impressive and persuasive an analyst of peak oil precisely because he was such an unlikely convert to its premise. One of the leading boutique investment bankers to the energy services industry, Simmons was long in the business of making money from oil, and he enjoyed the influence and largess that came with it.

A fork in the road

But according to Simmons, in the late eighties and early nineties he had a series of encounters that built upon each other, leading the otherwise bullish oil technology investment adviser and financier to begin sensing a pattern that made him reconsider The Limits to Growth, a cautionary tome that he formerly disregarded as rubbish. On a second reading, and after what he had started to observe in the world’s oil fields, the book’s premise made more sense.

At the time, Simmons was also an adviser to then Texas governor George W. Bush.

By the early aughts, Simmons was furiously researching oil discovery and depletion models, and after visiting Saudi Arabia as a guest of the government, he came away even more perplexed by the habit of Saudi Arabia (and other nations) to report unchanging or even rising oil reserve numbers year after year even while demand increased and production hummed along at top speed. The troubling thing was that at the same time, discovery of new wells lagged, and what was found offered little cause for optimism when seen through the lens of global consumption rates.

Reserve standard

“Something didn’t make sense,” Simmons said, which set him on a research mission that would result in his 2005 book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.

“Declaring proven reserves turned out to be much less scientific than I’d thought it was,” Simmons said. “With Kerr McGee, we asked, ‘How we were adding reserves but our production was falling?’ I got information about raging decline curves. You’d go to energy conferences and never hear anyone talk about decline curves, just reserves. The production info was all confidential.”

Unfortunately, said Simmons, “the industry conveniently rolled the SEC into a new reserve standard; if they (oil companies) can get them (oil finds) into production in five years they can call them proven reserves,” with no independent corroboration about the real reserves in a practical sense. That made the data more unreliable still.

In Twilight, Simmons detailed a veil of secrets under which oil reporting operates, and the myriad implications it has for national security, the global economy, and ordinary consumers.

By now Simmons, with 30 years in the oil industry—and a decade spent obsessing over decline models—was fully convinced of peak oil, and eager to speak out on it to warn the public and wake up the government to its responsibility to communicate the facts. “I felt like we were doing our clients an enormous service by telling them what was coming,” Simmons said.

Twilight in the Desert, Matt Siimmons's book on Saudi oil decline and global economic crisis.

By all indications, Simmons was as passionate a speaker on peak oil as many of the other leading figures in the movement, it’s just that he came from within the industry rather than from the academic, environmental, or economic perspective. This kind of driven business man is seldom inclined to bite the hand that feeds him, unless something is seriously wrong.

The Big Dig

Far from just playing mere doomsayer, as so many peak oil analysts are accused of doing, Simmons was sounding a clarion call against business as usual because he understood so well the mighty scale of industry and what it would take to transition from one economic and infrastructural paradigm to another. His reasoning is not that hard to fathom.

Simmons said he’s told many journalists, in interview after interview, that starting just now to prepare for the impact of peak oil “…won’t work. It will take 40 years to scale.”

Those journalists just called him a pessimist, he said. But perhaps he was right about the scale of the challenge.

Take for example Boston’s infamous Big Dig, the most expensive public works project in American history, which came in billions of dollars over budget and five years behind schedule. Mired in budgetary hearings, political jockeying, and public controversy, the effort to build a tunnel that would route Interstate 93 under downtown Boston has become emblematic of just how difficult it is to make big changes in American infrastructure.

Hundreds of projects at this same leviathan scale would be necessary across the country if we are to effectively adjust to life after the oil crash.

Retrofitting America’s current infrastructure for a lower energy world — moving from cars and trucks to rail, transit and walking, for example — while at the same time ramping up renewable energy production, conservation and distributed power, and reforming just about every industry from food to building to rely less on machinery and more on muscle power would be a project of heroic proportions for our civilization. To work, a national retrofit would have to be many times larger than the Apollo space program.

Such a project would create millions of jobs and trillions of dollars in economic activity, but it would take a half century or more and require unprecedented investment by government and industry to complete, if and when we could agree on what to do and where to start.

Now, while Simmons saw the need to use energy more efficiently, he didn’t necessarily buy into the idea that industrial civilization as we know it would need to power down, which seemed a bit of a disconnect from where I was sitting.

But barring the discovery of any radical new energy source, Simmons’ plea to get on the stick about coming to terms with what kind of nightmare was coming down the pike with peak oil was prescient, and a message crucial to our way of life.

And I’m not just saying that to speak kindly of the deceased.

Conflict of interest?

It’s not that Simmons didn’t have his critics. He had plenty, and they ran the gamut.

Some said he hawked peak oil because his clients and investors would stand to gain from ramped up discovery efforts, renewed drilling technology, and contracts for more platforms. Simmons countered that the evidence for peak oil became overwhelming, particularly seeing it on the inside. His aim, he said, was to know the data inside and out, to always be on top of the growing decline curves, and to succeed against the biggies by being the most knowledgeable analyst about the reality on the ground.

Other critics said Simmons could make money for his clients by talking scarcity in order to make oilfield investments look more attractive, setting him up for services contracts down the line. But it’s hard to square this against numerous statements made in the public arena where Simmons urged getting off of oil, stating that we were heading into an irreversible decline. He palled around with fellow peak-oil analyst Dr. Colin Campbell, a former oil industry geologist and the founder of The Association for the Study of Peak Oil in Ireland. The two had much in common both as oil guys, and peak oil guys.

Still others say that as Simmons embraced renewables, his new conflict of interest was in trying to steer investment toward his ocean power project. But by then, Simmons had already been saying for years that “we need something to replace oil.”

And this summer he was accused of trying to depress BP’s stocks with allegedly wild statements about their massive losses in the Gulf so he could profit on short sales.

If all of the critics were right, then Simmons would have been one helluva double talking snake oil salesman.

Meanwhile, he continued to be a respected personality in the peak oil movement. And after talking to him, I felt that he made a compelling case about oil depletion and its potential to disrupt our way of life.

Don’t get me wrong. Its not like I found everything that came out of Simmons’ mouth to be gold. His comments on nuking the spewing BP Macondo wellhead to kill it this summer struck me as a bit odd, though he wasn’t the only one who thought this might be necessary. At the same time, his estimates on just how big the spill was turned out to be far more on target than almost anyone else’s. He also was correct that a vast underwater “lake” or “plume” was indeed fanning out in the Gulf, suggesting the disaster was far worse than anticipated.

On other things, he seemed to have a blindspot.

Talking with him, I was struck by how he maintained that America could continue to live at about the scale of consumption that we’re currently enjoying — happy motoring, Walmart, EasyJet and all the rest — even without fossil fuels.

We wouldn’t even need oil anymore, he said, because we could replace it all with ocean energy, the nascent industry he was now backing. The sea could provide us electricity from the tides, ammonia and liquid fuels from distilled ocean water and bioenergy from seaweed.

While I’m as fond of renewables as the next gal, I’m also a huge proponent of conservation and I don’t believe anything currently on line can take the place of fossil fuels in terms of pure power. But I just took it as a kind of boyishly unbridled enthusiasm for his venture. After all, he didn’t ask me to invest. But perhaps he was relying on a growing world to do so?

“It’s obvious in my opinion that increasing population will be an issue. Many forecasts say it will be nine billion people by 2030.”

Yet, Simmons thought that all it would take to feed, clothe, and provide cars, roads, parking lots, and two-car garages for all these people would be to commercialize the right oil-replacement.

So…really? Was he saying that nine billion people worldwide could live the way people do in the United States, all fueled by ocean power?

And we thought oil was magic.

Finally, Simmons pooh poohed global warming and called climate-science data “cooked books.” This was one of the things that disturbed me most about our conversation. Coming from your average Republican oil financier from Texas, skepticism on climate disruption might not be much of a surprise. But since Simmons was so good on peak oil, I thought he should have known better than to just swallow this kind of flat-earth bunkum.

Houston, we have a problem

Still, when I look at the total picture of Simmons’s stances, it’s hard for me to see a man who was cynically manipulating oil depletion data just to profit from dupes. As far as I can tell he was no Kenneth Lay or Michael Milken.

Rather, I’m more inclined to look into the motivations of some of his critics, many of whom had an interest in preserving the national fiction that there’s plenty of oil left for American consumers and that there’s no need for our country to do much to reduce our consumption.

He was also not afraid to debunk what he saw as net energy losers, from corn ethanol to tar sands. Of the latter, he had this to say: “The energy intensity in the oil sands are one more illusory source. Their attitude is, ‘Houston, we don’t have a problem.’ ”

I see instead a man of great courage. After a successful career financing oilfield projects, Simmons decided to turn away from an industry that has been forced to pursue deep water and unconventional oil that’s getting harder and harder to produce and refine, and which takes a toll on the environment. He’s also rejected the greasy smile of Big Oil that suggests we’re enjoying just another day bathing in the light sweet crude that’s still gushing high and wide from Old Spindletop.

In the face of this we’re supposed to believe Simmons touted a fictional decline in world oil reserves just to make a buck?

Please.

Simmons’s legacy

While a host of other courageous men and women are daily speaking out on the peak oil issue, their combined evidence and cautionary notes have yet to really penetrate the national conversation.

Simmons told me that he hoped the BP Gulf disaster would have a silver lining. We need something, he said, “to force us into a fast march.”

Yet at this point, both industry and government have stayed on their same course, showing what looks startlingly like a vast disregard for the future of this nation. Even the Obama administration, which could own this conversation and lead the country to find our reserves of inner power, on the subject of peak oil has shown only fecklessness and cowardice, missing an opportunity for vigorous and open leadership in a new direction that would combine conservation with efficient infrastructure and clean energy.

Whatever direction the nation is currently taking on renewables, and however inspiring it seems, those in the know recognize that most renewables are so woefully behind their fossil fuel counterparts that they could not begin to take up the slack in the event of steady depletion or any major supply disruption.

On solar panels and wind turbines, the US is behind other nations, including China, on investment, production, and distribution. And we kicked our passenger rail system to the curb decades ago, leaving us effectively stranded on the freeway in a blackout when the oil shocks inevitably come.

Usage info graphic. Graphic: Ocean Energy Institute.

Usage info graphic. Graphic: Ocean Energy Institute.

Simmons thought that our society was in great peril. But his belief in and enthusiasm for the immense untapped potential of ocean power was unstoppable. He recounted how impressed Obama’s Energy Secretary Dr. Stephen Chu was with the potential of ocean energy when he visited the Maine facility in June, remarking that he had no idea how powerful ocean energy could be.

Will the U.S. government act on it?

My only experience with the power of the ocean was getting knocked down in a face plant on the gritty sandy floor of Virginia Beach when I was about 15, leaving my bikini in disarray and a mouthful of sea water in my gob. I had hoped to report more on ocean energy and the future of Simmons’s dream after his death, but had heard nothing back from the Ocean Energy Institute as of press time.

What I did learn was that Simmons was interested in much more than tidal power as a way to generate electricity. He thought that the ocean could fill many of our energy needs. Salt water could be turned into liquid ammonia, which could replace gasoline and diesel fuel for use in road transportation. Sea plants could provide biofuels with a much higher yield than dry-land crops such as corn, soy, and even switchgrass. And, since distilled water is a byproduct of the process to convert sea water into liquid ammonia for fuel, ocean power could even help solve the emerging global water crisis.

The only thing stopping ocean energy and all its benefits? Lack of attention and investment. The cure? Lots of publicity.

“A cover story in Time magazine would help,” Simmons told me.

Whether they’ll take up the topic, we don’t know. But it remains intriguing to us, and now that the potential of ocean energy is emerging as a viable player in the alternative energy landscape, we’ll plan to pursue more about it in these pages in the future.

Meantime, Matt Simmons, you inspired us with your courage, persistence, and willingness to seek solutions. We admired you, and we’ll miss you.

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Comments

  1. H. Bishop Dansby says

    Thanks for this article. I was impressed when I saw him in “Crude Awakening.” We also lost Schneider, the great climate scientist, who died recently.

    One of the people that watched Crude Awakening with us here in Harrisonburg said after the movie, “Well, that makes sense. That’s just common sense!” So, it seems some folk are not capable of accepting global warming can accept peak oil.

  2. Lenny Reich says

    I would like to flesh out your statement about the Ocean Energy Institute’s plans for generating energy, “The sea could provide us electricity from the tides, ammonia and liquid fuels from distilled ocean water….” My understanding is that for offshore generating facilities (tidal, wave, and/or wind), the electric power created would be used to electrolyze seawater and make liquid ammonia (NH3), which is much easier to store than hydrogen. The ammonia would be transported ashore, where it could be used in engines or otherwise combusted (in the presence of a catalyst) for heat, yielding just nitrogen and water in the process. There are, however, drawbacks, primarily that the electrolyzation process is not terribly efficient (that is, a significant amount of energy is wasted) and the liquid ammonia has approximately half the heat value of comparable quantities of petroleum fuels. But neither of those drawbacks are insurmountable, and this seems like a promising avenue to pursue, especially as a liquid fuel is very attractive for transitioning our society away from petroleum to different energy regimes.

  3. says

    This is definitely a really outstanding piece of writing, when I was going through it I could not help but agree with you. I am about to include your site to my personal list of favorites and i also look ahead to reading through your other posts. Continue the good work, this is one of the better sites on the internet.

  4. Toby Kelsey says

    It’s interesting to read your take on his position on various issues, but it would be nice to see his remarks in detail. Do you have an audio recording or more complete transcript of the interview?

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