PEAK OIL UPDATE FROM MATT SIMMONS

A fascinating interview, way too long to deconstruct. Click through to read or listen to it. Here are just a few of the highlights:

All the Canaries Have Stopped Singing
Matt Simmons, interviewed by Jim Puplava, August 18, 2007 (Financial Sense)

WHO
Matt Simmons, CEO, investment bank Simmons International, author of Twilight in the Desert and Peak Oil prophet;
Jim Puplava, Founder, PFS Group, market commentator, Financial Sense Online and host, Financial Sense Newshour

WHAT
Simmons: “…I don’t know how closely you followed the remarkable National Petroleum Council study that was supposed to be on peak oil and it turned out to be a study called Facing Hard Energy Truths to 2030. And what they did is basically dump on the concept of peak oil. They kept saying – this was the major oil companies – that they’re fine; that the world has unlimited amount of energy resource endowment…”

It's that old supply-and-demand thing again. (click to enlarge)

WHEN
Simmons: “…all the models that anyone does are basically all, by definition, demand-driven. And once you end up with a demand of 120 million barrels per day then you have to go to work and basically figure out where the supply will come from. And it was basically deemed over the last…ever since we started doing serious modeling which is sort of 35 years ago, it was deemed to be heresy to say: well, there’s no supply. So you just basically make up where you think the supply could come from…”

WHERE
Simmons: “…I saw – on was it the Today show or some segment on NBC? – the race for energy in the Arctic now that the Russians have planted a flag under the North Pole. And they casually said 25% of the world’s reserves are in the Arctic…We haven’t discovered any oil and gas in the Arctic. But if you’re modeling and you’re trying to look, you can’t really say Arizona and Nevada because we’ve proven there isn’t any oil there. So you pick an area we haven’t ever been to because therefore there’s no way to prove that it’s not there…”

WHY
Simmons: “…I have people all the time saying, “the major oil companies know what’s going on, don’t they? And this is just a cover?” And I say, “no. They don’t have a clue what’s going on because I argue with them too often.” If it was a wink and a nod, and saying, “Matt, we know you’re right, but God, it would collapse our share price, or it would panic the world oil markets,” and so forth – but what’s scary is they believe they’re right. Dan Yergin who’s with Cambridge Energy Research Associates I’m positive he thinks he’s a hundred percent right, and that I’m just basically an unbelievable crackpot…”

Just because they say they have oil doesn't mean it is of use to anybody. (click to enlarge)

QUOTES
Simmons: ” I’ve been preoccupied in the last six months trying to get some better data on the issue I call rust…the fact of the matter is the refineries in the United States it would appear their core units are basically on average are about 85 years old…A refinery that’s 85 years old should have been rebuilt. And I don’t care how many times you come in and do a turn around and replace the valves in a refinery, until you finally tear the boilers down and rebuild them you have an 85-year old refinery. Which is why now refineries are blowing up so often. But they’re always called we had an operational failure at the refinery; a fire broke out. And unfortunately, too often, they say three people died. And these aren’t operational things. This is a system that’s grown beyond its original design life…”