The Oil and the Glory

Matthew Simmons, peak oil proponent, dies at 67

The energy world lost one of its most provocative thinkers this weekend: Matthew Simmons, a former investment banker and adviser to President George W. Bush, who died of a heart attack at his home in Maine last night. For the past five years, Simmons, 67, had been the premier pessimist in an industry that, on ...

The energy world lost one of its most provocative thinkers this weekend: Matthew Simmons, a former investment banker and adviser to President George W. Bush, who died of a heart attack at his home in Maine last night.

For the past five years, Simmons, 67, had been the premier pessimist in an industry that, on the main, tends towards optimism. He was arguably the most thoughtful and influential advocate of the idea that the world’s steadily increasing appetite for petroleum would lead to peak oil — the point at which production capacity can no longer ramp up to accommodate increasing demand — and that it would happen sooner rather than later.

Simmons was hardly the first to come up with the idea — the peak oil theory has been around (though never dominant) in the oil industry since the 1950s, and was getting full-blown National Geographic treatment in the ’70s. But it was Simmons’s meticulousness and insider-to-doomsayer conversion story — both of which are on display in his 2005 book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, which propelled him to notoriety — that made him peak oil’s best-known apostle in the current era, the subject of magazine profiles and a recurring character in oil documentaries.

A banker with hundreds of oil-industry deals under his belt, Simmons had first grown worried about the threat of production collapse in the ’80s, and started looking more closely at what publicly available data there were on the world’s largest oil fields. He emerged convinced that peak oil was not just inevitable, but imminent — in 2005 he suggested it might come as soon as this year. This notion ran afoul of the mainstream of thought within the oil industry, and Simmons made intellectual enemies out of more optimistic energy analysts like oil guru Daniel Yergin (with whom he sparred in Foreign Policy last year). In 2005, Simmons made a $5,000 bet with New York Times columnist John Tierney that oil would cost $200 a barrel as of later this month. He will have posthumously lost — crude is going for $81.01 as of this morning — although Tierney’s victory hardly seems a fair one, in the wake of an economic meltdown that pulled the price of oil down from its triple-digit pre-crash apogee. (In recent months, Simmons also emerged as a particularly outspoken critic of BP over the Gulf of Mexico spill, although his strident comments — in a Bloomberg TV interview in late July he insisted that only a nuclear explosion would fix the Deepwater Horizon leak — garnered criticism from even his biggest fans in the peak oil community.)

To the extent that there is a consensus about the future among oil thinkers, it’s that once the global economy rebounds the world is most likely headed for a nasty decade, in which falling production — the result of underinvestment in exploration in recent years rather than the actual depletion of reserves — paired with exponentially increasing demand from new energy consumers in China and India renders oil supplies scarce and expensive, but that things should sort themselves out over time as renewed exploration brings new sources online: A short emergency rather than a long one. But you can see echoes of Simmons’s warnings in the gloomy forecast offered last month by London’s august (and not remotely alarmist) Lloyd’s insurance market, which repeated the short-term cautions of the oil industry but also warned that "Oil production will reach its peak level and go into irrevocable decline sooner than we are prepared for, with catastrophic effects on our societies and economies."

Simmons wasn’t just the oil industry’s prophet of doom. Perhaps more importantly, he was its prophet of uncertainty: His beef was with the prognosticators as much as it was with their prognostications. "The more I studied," he told an interviewer in 2005, "the more I started to realize that so many people who call themselves experts in the energy market, including government analysts, are in fact experts in their opinions and don’t actually base a lot of it in actual data." In truth, even the most influential analysts often had limited data at their disposal, and were too willing to take petrostates and oil multinationals at their word on the size of reserves they had every reason to overstate. In the end, this may have been Simmons’s most valuable contribution to the discussion about the future of oil: The idea that any prediction, regardless of how optimistic or pessimistic, should carry with it the burden of proof.

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