Green Car Congress  
Go to GCC Discussions forum About GCC Contact  RSS Subscribe Twitter headlines

« KPMG: Auto Execs Expect Hybrids and Small Cars to Make Biggest Gains | Main | Hybrid Sales in US Top 205,000 in 2005 »

Print this post

Simmons Projects Oil Price of $200 to $250 per Barrel

4 January 2006

Oelpreis_tanken_400
Dangerous weapon. Source: Capital.

Matthew Simmons, founder of the energy investment bank Simmons & Co and former energy adviser to President Bush, is projecting oil prices of between $200 to $250 a barrel in the coming years.

In an interview with Germany’s Capital economics magazine, Simmons, who has become one of the most vocal business figures on the issue of peak oil production, adduces the ongoing low levels of new discovery and ever-increasing demand as indicators of the coming crunch.

Furthermore, as he outlined in his book Twilight in the Desert, Simmons concludes that the Saudi oil reserves—which are absolutely essential to any scenarios of fulfilling demand—are overstated and may themselves already have peaked.

Once Saudi oil peaks, according to Simmons, the world will pass sustained peak oil.

Simmons suggested in the interview that daily global oil production might drop to 65 million barrels per day by 2012. Currently the world is consuming about 85 million barrels per day.

Resources:

January 4, 2006 in Oil | Permalink | Comments (27) | TrackBack (0)

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c4fbe53ef00d834a42be369e2

Listed below are links to weblogs that reference Simmons Projects Oil Price of $200 to $250 per Barrel:

Comments

Can we get a translation of that review? Does anyone who reads this site happen to speak/read German?

Here's an english translation from babelfish:

http://world.altavista.com/babelfish/trurl_pagecontent?lp=de_en&url=http%3A%2F%2Fwww.capital.de%2Fdiv%2F100001954.html

Thanks for the link fizure. Page was understandable for the most part. I didn't really state much that wasn't already covered in this article except the part about oil consumption per capita in china and india vs mexico. That was interesting. It seems really unlikely that we could increase global production by 50% considering that oil production is several areas is declining.

Interview in Grist from November
http://www.alternet.org/envirohealth/27942/

So who is surprised by this? We knew it was just a matter of time before the $100/barrel threshold was crossed. The $200 and $300 had to follow.

The CTL pilot plants are looking like better and better investments with news like this.

I see more clean Diesel powered vehicles in our future.

This is all speculation, howevwer. No one really knows when oil will peak. Simmons says oil will be $200 a barrel in 2012, but then Cambridge Energy Research Associates puts out a detailed report saying oil is not close to peaking. Who to believe? All we can do is to be as efficient as we can in our lives, and to promote the idea of clean/efficient technologies. If oil was that expensive, there would be a huge drop in consumption, supply and demand.

Stu. Spot on. It's really hard to know what we're dealing with because several of the major players have good reasons to be evasive when it comes to stating accurate reserve numbers. Why would the Saudis or any other major oil producer want their customers to know that their production is waning or that their peak production is imminent? That would give us (the customers) time to develop migiation/migration strategies that might very well make the producers' oil fairly irrelevant. The oil producers don't want that. Doesn't make good business sense. So, we're probably going to get reasonably inflated reserve values from them. That makes it hard to know what's really going on.

In all likelyhood, peak oil will fall somewhere in the middle of the doomsday ("The sky is falling!!") vs. ostrich ("I can't hear you lalalalalala") predictions.

It's amazing what the market and supply & demand can do. Who knows who to believe. One things for sure, Americans on average have more income than almost any other country (according to cia's world fact book Luxumberg (sp?) and some small island country have a greater per capita GDP) and we should be securing our own future with new energy technology. If theres one counry that can afford it, it's us, and we need to reduce our oil comsumption more than anybody. It's not good for national security, the economy or the environment to wait until the last minute when supply is very low and demand is very high. Think about how much the US could benefit if it lead the charge in new energy technology. (Hypothetically in the future)While India and China are fighting over oil and dealing with high oil prices we could be far less concerned about the whole thing if we didn't depend on oil for so much.

Agreed. The horizon for market driven events is too short. A few years at best. The market isn't capable of driving policy when changes are more than a few years out. That's just not how it works. It's up to people working and thinking outside the market paradigm to solve problems like this. The federal gov't is not showing any real leadership in this area and it's pathetic.

Its full of it. The fact is several forces combine to make that impossible.

1 Its far cheaper to make synthetic oil then that from coal. Thus long before it reaches even 120 a barrel coal will take over.

2 As the price goes up hard to reach places become economical to drill.

3 A fair number of countries simply will fall apart as the price rises and some are already falling apart. As they do demand falls and the remaining oil can feed those that can pay the 80-120 a barrel for it. Long before 180 a barrel most countries will be forced out of the market. This includes most of europe and much of asia south america and all of africa. China can afford it and america sure can but few others can afford 180 oil.

If Oil consumption goes up to over 100 million b/dy by end of 2007 and if the Irak on-going war and Iran nuclear question are not solved, it could push the price over $100. This may not be all bad news but the type of medecine required to convince North Americans to transition more rapidly to efficient alternate energy vehicles. Much higher Oil prices will extend peak oil for a few more decades and could reduce pollution if we don't switch to dirty coal. Energy will cost more and we will feel it in the pocket book unless we start consuming less.

Harvey, I agree. Really its all economics. When it is economically necessary people WILL consume less. We've seen it before in history. People will take public transportation if they have to. You can bet if gas is $5 a gallon people will carpool. Carpool with just 1 person and you cut your consumption in half. When energy costs more people will drive smaller more efficient cars...we've already seen SUV sales decline. Another thing I've been thinking of...with todays internet and wireless technology, many people that commute with a car to work could actually work from home. This trend has already been happening actually, and some predict that 40% of US workers could be "distributed" by 2012. Really, predicting things is an art no one has mastered. Humans naturally fear the worst will happen, but history says that typically doesn't happen.


It is true that we don't know for certain when oil will peak, but the CERA estimates have been widely criticized as being unrealistic. They don't take depletion into account for one thing - they assume that oilfields that currently exist can keep pumping oil at the same rate.

Nose around over at http://www.theoildrum.com for more detailed discussion of all of this.

I live in far Northeast Georgia. I would rather take a beating than drive to Atlanta. Last time I went a couple of years ago, it was stop and go on I-85 for about an hour.

I had to go again on 29 December. As usual I left two and a half hours before my appointment. I arrived one hour after I left!

Must have been that dandy Honda Civic Hybrid I was driving. (In the HOV lane.)

As Stu mentioned "because several of the major players have good reasons to be evasive when it comes to stating accurate reserve numbers.". There's an even bigger reason for OPEC players to have inaccurate reserve numbers than what was mentioned previously.

Something interesting that was noted in "Twilight in the Desert" is that the OPEC oil cartel reserve estimates, determine the rate at which individual OPEC countries get to pump/export (by OPEC). Now if you follow this, they all have incentive to overinflate their reserve estimates (alot), because that's how you get to sell more oil (within OPEC)at the moment.

Remarkably, shortly after this system went into place (long ago), many of the OPEC countries reserve estimate numbers jumped alot, without new reserves being located in these countries. Leads to many interesting questions about OPEC reserve numbers (that everyone counts on), eh?

Scott,I have heard that the current rules for reserves are highly outdated, since they were implemented in the 1970s and that the SEC will issue new rules this year to reflect new technology, etc. For instance, I dont believe that the current reserves numbers include un-conventional oils and such. We'll see. Non-Opec and OPEC oil production is set to increase this year, possibly pushing prices down with a flood of new supply. Amazingly, overall consumption in the USA actaully decreased .3% in 2005. That doesn't seem like a lot, but it typically increases 2-3% a year. I think that shows that as gas gets more expensive, people consume less.

Something just occurred to me reading the above posts. First, consider what just happened in the wake of Katrina: world production declined by only a few percent and yet prices shot up to give, for example, Exxon/Mobil the most profitable quarter of any company in history.

Now think about two possible future scenarios: 1) the world develops alternatives to oil in anticipation of the peak (i.e., starting today) and gradually moves away from it before production declines and the resulting price increases become severe. Oil is "left in the ground" as demand pressure disappears.

Or 2) The world continues on its present course of increasing demand, denying that there's a peak issue until we're fully into it. Prices go through the roof. Alternatives are developed but not before we're struggling to produce oil from tar sands and everywhere else, while pumping the last drops of "easy" oil at prices far exceeding their actual costs of production (which is what resulted in the huge profits achieved last quarter).

Recognizing that oil is eventually going away under any scenario, which of these two presents more of a "golden parachute" to an oil industry executive, or for that matter anyone invested in the oil industry?

Sure, there is a great deal of variability in the different projections of peak oil. But it's probably naive to believe that they are all equally credible.

"So who is surprised by this? We knew it was just a matter of time before the $100/barrel threshold was crossed."

Oil didnt cross $100/barrel and never will.... others make the point clearly. Simmons is a geologist not an economist and the *price* of oil is based on political and economic factors that go far beyond depletion rates of oil fields. Simmons himself admits that he has made WILD CLAIMS PRECISELY TO DRAW ATTENTION TO THE ISSUE EVEN THOUGH HE DOESNT FULL BELIEVE THE SCARE SCENARIOS.

In other words, to draw attention to 'peak oil' he makes claims that are outrageous and unlikely to ever occur.

Oil prices in he upcoming year and years WILL GO DOWN. You want to know why:
1) Somebody already pointed out - US use of oil in 2005 was down from 2004. First time in almost 20 years.
2) Azeri oil fields, Bongo oil field, "Thunder Horse" and a number of other big fields are coming online to add 1.5 million in oil capacity this year. Caspian sea oil: The first crude began flowing through the pipeline July 2005. BP West Azeri platform at 300,000 barrels a day began
production december; in addition to 340,000 barrels from the Central Azeri started in may 2005. By 2008 the project should reach peak of 1 million bbl. per day. There are a number of other projects like that, which will add to supply.
3) "If Oil consumption goes up to over 100 million b/dy by end of 2007 " ... this will NEVER HAPPEN. estimates are for 1.5% grwoth in 2006 to 85 mbd, and maybe another 1-2% for 2007.
Demand is increase 1.5 mbd each year, and supply 2.5 mbd each year.

Do the supply-demand math, it means moderation in prices.
As for oil emergency, we got a 'dry run' of that with Katrina,
which knocked out 400,000 mbd supply and a lot of refinery capacity. ... our reserves helped buffer the blow and oil prices stabilized in the $60s, where they are now.

As for
"It is true that we don't know for certain when oil will peak, but the CERA estimates have been widely criticized as being unrealistic. They don't take depletion into account for one thing - they assume that oilfields that currently exist can keep pumping oil at the same rate."
... whoever is saying that is talking nonsense. CERA accounts for it by doing oilfield by oilfield analyses, those who criticize them are arguing against the best experts in the field.ased on a field-by-field analysis of global oil production and development, CERA estimates that world oil production capacity—including crude oil,
condensate, natural gas liquids, oil sands, gas-to-liquids, and other
sources—has the potential to increase from 87 million b/d in 2005 to as
much as 108 million b/d by 2015.
- as much as 16.5 million b/d of additional production capacity for crude oil and natural gas liquids could come on stream by 2010, an increase to 101.5 million b/d from 85.1 million b/d in 2004 (OGJ Online, June 24, 2005).
-capacity additions to 2010 are predominately light (8 mbd), medium (5 mbd),
and heavy (3 mbd).

It's possible, but extremely unlikely that oil will be higher priced than it is now. The far more likely scenario is moderate decline in prices to the $40 range as adequate supply comes on and demand growth is moderate (1-2%/yr). The $60+ current price include a premium from geopolitical uncertainty.

I just came back here...

haha! Ummm, Patrick, you wrote

"Oil didnt cross $100/barrel and never will.... others make the point clearly. Simmons is a geologist not an economist and the *price* of oil is based on political and economic factors that go far beyond depletion rates of oil fields. Simmons himself admits that he has made WILD CLAIMS PRECISELY TO DRAW ATTENTION TO THE ISSUE EVEN THOUGH HE DOESNT FULL BELIEVE THE SCARE SCENARIOS."

Don't correct people's factual mistakes when you are apt to make them the second after correcting them... Matthew Simmons is *NOT* a geologist. He is an investmenr banker, and the bastard is filthy rich. Yeah, you're right--your point stands tall, he must no nearly nothing about economics to have the most successful private energy investment bank in the world.

Irony is never lost anywhere...

Simmons corporate website:

http://www.simmonsco-intl.com/

Patrick, as for your blind faith in "CERA" and "the best experts in the field" (whatever that means--you mean the corporations?!) perhaps you should read something other than free-market fairytales about the crude oil supply/demand merry-go-round. First off, the US has already fully industrialized and is now actually passed the point of real increases in its energy consumption. However!! That does not change the fact that China and India will be industrializing (India is presently building massive highway systems all over their country) and the demand growth that will occur in China and India will not be able to be sustained by supply increases with present technology. It is simply impossible to get another few hundred million people (more than that if China wants to join the party...) driving around--even with small fuel efficient cars. Not to mention doing it *cheaply*.

Your optimism about potential global declines ranging from 2-6% after we're off the plateau is only an indication of how frightening our future will be... And the sad thing is you're probably quite educated in the subject of energy, and still have a "happy-go-lucky" hooray for the free-market attitude, while vast majority of people just have no clue whatsoever, about anything energy (or market) related.

Here's hoping we have less people like you in power in our awfully run, corrupt to the core federal/centralized government.

Good day sir.

oil real comfortable price is around $500 $600 per barrel in 2008-2009

2012-2013 $1000-$2000 per barrel

$200-250 per barrel is not too much

$10-12 per gallon is not to much I think $250 per barrel is a comfortable price for 2008

2010 $300-400 per barrel is not too much

I think oil real price is above $200-$350 per barrel and it could reach $386, but 386 per barrel is not too expensive, oil above $400 per barrel is too expensive

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Green Car Congress © 2013 BioAge Group, LLC. All Rights Reserved. | Home | BioAge Group