Proposals for dealing with Peak Oil - Simmons

For those interested in delving into the Peak Oil issue from an oil industry perspective, a good primer may be the work of Matthew Simmons, Chairman and CEO of Houston-based Simmons & Company International, the leading investment bank specializing in the energy industry, CFR member and author of "Twilight in the Desert - The coming Saudi oil shock and the world economy." (Notably, when the book was published in mid-2005 Saudi production was 9.6 Mbpd, and it soon started to decline until stabilizing at 8.6 Mbpd in 2007, although it appears to have picked up since last August to 9 Mbpd in November, as commented in http://www.econbrowser.com/archives/2007/11/relief_on_oil_s.html). And no, I'm not on Simmons' payroll.

His presentations can be found at
http://www.simmonsco-intl.com/research.aspx?Type=msspeeches
and his interviews by Jim Puplava at
http://www.financialsense.com/Experts/2007/Simmons.html .

To start, I suggest the following two recent presentations:
At CalTech in Pasadena, October 23, 2007.
http://www.simmonsco-intl.com/files/CalTech.pdf
At ASPO World Conference in Houston, October 18, 2007
http://www.simmonsco-intl.com/files/ASPO%20World%20Conf.pdf

A summary of his views on how to deal with Peak Oil is quoted below from his August 18, 2007 interview at http://www.financialsense.com/transcriptions/2007/0818.html

JIM: If all the canaries have stopped singing – I guess as you look at this, and how important energy is to all economies – what’s plan B?

MATT: We don’t have a plan B. I’ll tell you several things that we could do that create sort of a very viable semi-plan B. But the problem is no one is doing them yet. And they have to take some sort of coordinated effort. Now, I think there’s an enormous amount of things that we could do to significantly reduce the way we drive. There are enormous amounts of things we could do to significantly reduce the amount of food miles embedded in our whole food distribution system. There’s an enormous amount of things we could do to change the way we transport goods and get things on water versus roads. But all those things basically take coordination, and somebody needs to start doing them, and we’re starting to run out the clock on that. ...

So there are some things we could do but the problem is that they’re being hindered by so few people understanding that this isn’t a feel good thing or let’s do this to reduce the carbon footprint, which might or might not be an issue. This is basically a crisis because demand can’t basically grow anymore; (emphasis added)

He had previously expanded on the three basic points in his proposed solution in his Aug 6, 2005 interview by Jim Puplava at
http://www.financialsense.com/transcriptions/2005/Simmons.html

JIM: Matt, what comes afterwards? One day, as I mentioned, we’re going to wake up and find out that peak oil is here, we’re going to be dealing with it. Do we go to oil rationing? Do we go to a major, national conservation program? And I guess even more importantly than that, given the high demand on oil today – not only just from the United States and Europe, but India and China – how do we ration oil without going to war?

MATT: We have to figure out a way to do that because if we go to war, it will actually be the worst war we’ve ever fought. And if we don’t address the problem, we will be in an energy war. What I find interesting is I actually think we can solve this problem, but I also think if we ignore it, you can’t create a scenario that is too awful. What we have to do is first of all, long term, create some new forms of energy that don’t exist today. That might or might not be possible. I suspect that actually it will be possible because we haven’t worked on it for a hundred years. While we’re doing that though, we have to figure out a way that allows the world to prosper and not shrivel up while we’re using a lot less oil per capita. And figure this out quickly enough so we educate the China and India’s of the world on how to create a sustainable society so they don’t build a society like ours. Because it’s going to be easier for them to do some of these things than it is for us.

And I’ll give you just a quick shopping-list of some of the things that we are actually going to need to do. In the shipment of goods, we use worldwide about as much, or a little bit more, diesel fuel than we do motor gasoline, and most of the diesel fuel is used by the truck fleets moving goods. If you could wave a magic wand and in a 5 year period of time and get all of the goods off the highway system going long distances by trucks, and put them on either railbeds or water transportation: on the railbeds – railroads – as long as you have long distance transportation, and long trains versus short trains, and short distances, you can get an energy efficiency savings of somewhere between 3 and 10 times – that’s not 3 and 10%, that’s 3 and 10 times; if you can get them on boats versus trains, it has an additional energy efficiency savings of another 2 to 5 times. So by getting trucks off our highway system we have a major impact on removing traffic congestion. And traffic congestion is public enemy number 1 through 5 on passenger car fuel efficiency. So it’s a real win, win, win.

At the same time we have to alter our distribution of food. You know, the average thing we eat today comes from, I believe, an average of 1500-2000 miles. But there are a lot of items, like the first time I ever heard of this concept of food miles was a speaker in London, last Spring, who pointed out that in the Summer in the UK ,almost all the apples come from New Zealand, and they have embedded in them 22,000 miles of travel of a vessel, half coming from New Zealand, and the others going back. When they’re onboard the vessel they’re refrigerated. So it’s a very energy intensive process. We actually can grow stuff close to home in most parts of the world. We just got lazy and thought it was really fun to just go into a grocery store and see all this produce: it doesn’t taste very good, but it looks nice.

And then finally we can basically go to distributed work. Because I found being in Maine in the Summer is a lot more pleasant than being in Houston, I taught myself 10 years ago how to be up here and be more efficient than when I’m in Houston. I think there are lots of corporations that have a thousand people working together; there’s no need for a thousand people to be working together, other than the fact it was just a historical coincidence. We now have the technology that people can actually either work at home or work in their village, and by saving 2-4 hours of commuting they will be far more productive. And then we basically end globalization as we know it today, which is effectively a really flawed plan of breaking manufacturing components down into their smallest parts, and finding the cheapest place in the world to manufacture the parts, and then zinging them around the world to be assembled into bigger, and bigger units, until they finally arrive on the showroom as a piece. If you make stuff close to home, you can have a major savings in fuel efficiency. That sort of a plan put in place over 5-7 years would take a lot of coordination; not a single one of those things are impossible to do.