What Is the Future of Energy?

11/11/2009

“Peak oil is past tense,” says Matthew R. Simmons, Chairman Emeritus of Simmons & Company International (SCI), who addressed the Darden Community yesterday as part of the Leadership Speakers Series.

According to Simmons, who has spent his career digging for and analyzing data about the energy market and the world’s giant oil fields and their flow rates, the global supply of oil peaked in Mexico’s Cantarell oilfield in May 2005. “This will be the most serious issues that the world faces,” he says.

In 1974, Simmons founded SCI, a specialized energy investment banking firm. Today, SCI has offices in Houston, Texas; London, England; Boston, Massachusetts; Aberdeen, Scotland; and Dubai, United Arab Emirates. The firm has completed approximately 785 investment banking projects for its worldwide energy clients totaling more than $140 billion.

In 2005, Simmons published the book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. The book uncovers a looming oil production crisis in Saudi Arabia. While the energy market remains hopeful that oilfields in the Middle East will continue to increase their production to meet rising world demand in the years ahead, Simmons has crunched the numbers – numbers from the Society of Petroleum Engineers. “Only 35 oil fields still produce in the Middle East,” he says. Worldwide, many key oilfields have experienced accelerated rates of decline and diminished flow.

And since oil is the world’s only transportation fuel, this presents a serious problem. As the population of countries like China and India swells, so too will the demand for automobiles and gasoline.

“We’ve had cheap oil for a long time, and there is a parallel between the aging of the world population and the aging of oil fields,” he says. “At some point, you decline.”

As an alternative, Simmons suggestions Plan B. “If we do the following four things, we can buy half a century – maybe: (1) End long-distance commuting; (2) Grow food locally; (3) Redesign transportation and ship as many goods as possible by water and then light rail; and (4) End globalization.”

Simmons is also looking at the energy capabilities of other natural resources, including the oceans. “It’s hard to find a place where there’s no offshore wind,” he says.

In 2007, Simmons founded The Ocean Energy Institute in mid-coast Maine, a think tank and venture capital fund whose focus is to research and create renewable energy sources from all aspects of oceans.

One of the institute’s latest projects is to develop an offshore wind farm, with 70-90-story high wind turbines, in collaboration with the University of Maine. “We’re proving that it can technically be done,” he says. “Once we prove it works, we’ll have corporations clamoring to do this.”

Founded in 1955, the University of Virginia’s Darden School of Business improves society by developing principled leaders in the world of practical affairs.

For additional information, contact communication@darden.virginia.edu.

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