Crude awakening

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Matthew Simmons, non-executive chairman of Simmons and Company.

Population growth, developing economies and a surge in vehicle ownership means the demand for oil will continue to grow. Can supply cope?

One of the most critical questions facing the global energy market today is whether key oil producing nations can increase production to meet the current, and future growth in world demand, otherwise known as the 'peak oil' issue.

The name most associated with 'peak oil' is King Hubbert, who became an internationally recognised name when he worked for Houston-based Shell Oil Company from 1943 to 1964. His theory was based on the premise that oil is a finite resource. Peak oil, or Hubbert's peak, is the point at which maximum world production is reached, after which its rate terminally declines.

Hubbert predicted a worldwide peak in "about half a century" that would progress in a bell-shaped curve fashion, now called ‘Hubbert's curve'. Hubbert's curve is symmetrical, peaks when half of all oil (or other fossil fuel) has been produced, and there's only a single peak until oil production is exhausted.

Matthew Simmons, the non-executive chairman and founder of Simmons and Company International (SCI), one of the largest investment banking practices serving the energy industry, is today's strong proponent of the dangers of peak oil, and believes that the peak oil problem is poorly understood.

"It is no secret that the price of oil has fluctuated over the years, 'we're going to have low oil prices forever' - people used to say, but only when the embargo of 1973 happened and prices went through the roof, did it allow a myriad of service companies to see the beginning of offshore oil get very serious," says Simmons.

"Peak-oil is a reality, and it makes global warming look like a trivial problem. The immediacy of peak oil takes so long before we can do anything to prepare for how to go about using less oil - we might be lucky enough to have it 4/5 years away but it isn't decades away - I say the likelihood of that is 1%," he adds.

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READERS' COMMENTS

Peak OIl impacts
Posted by Clifford J. Wirth, Manchester, NH, USA on Friday 18 April 2008 at 21:08 UAE time


Peak Oil impacts will be catastrophic: http://www.peakoilassociates.com/POAnalysis.html

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