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
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
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
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.
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Fool contributor David Lee Smith doesn't own shares in any of the companies mentioned. He does welcome your questions or comments. The Fool has a disclosure policy that's already worth more than $200 a barrel.