The Pied Piper of Peak Oil

I hope that Fools with an interest in energy pay at least some attention to Matthew Simmons' ruminations about the sector. The Texan (by way of Utah) author offers a sobering perspective on an oil supply-demand picture that I believe looks bleaker by the day.

Simmons, who's written Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, operates from Simmons & Co., a Houston-based energy investment banking firm. On Tuesday, he was a guest on CNBC, discussing "peak oil": the notion that global oil demand will soon eclipse supply, if it hasn't already. John Hofmeister, the president of Royal Dutch Shell's (NYSE: RDS-A  ) (NYSE: RDS-B  ) U.S. operations, had already discussed the issue on CNBC last week.

Unlike Hofmeister, Simmons is convinced that overall declining production is essentially liquidating the big oil companies. One quarter doesn't make a trend, but the three largest U.S.-based oil and gas companies -- ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , and ConocoPhillips (NYSE: COP  ) -- all saw their December-ended quarter production slide from the year-earlier level, despite record high prices during the period.

Simmons calls oil produced from Canada's ballyhooed tar sands "turning gold into lead," pointing out that Shell has spent $14 billion in exchange for production of about 100,000 barrels a day -- in line with the output of a single good-sized well in Saudi Arabia. He's also reportedly placed bets that the price of crude will reach $200 a barrel by 2010.

While I think he may be somewhat aggressive in his forecast, I won't quarrel with his sense of direction. And I'd also agree with his CNBC-aired observation that Chesapeake Energy (NYSE: CHK  ) has amassed an impressive record of production increases. Indeed, I'd toss similar kudos to Apache and Devon (NYSE: DVN  ) .

Overall, I hope Fools won't take the comments of peak oil troubadours like Simmons lightly. At the very least, their predictions should rouse you to tend regularly to the all-important energy portions of your portfolios.

For related Foolishness:


Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 607241, ~/Articles/ArticleHandler.aspx, 11/26/2014 9:29:03 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement