FSO Transcription - Matthew R. Simmons "Twilight in the Desert" August 6, 2005

Deadly serious - $300 a barrel oil very soon.

I was apparently the first person in the world to ever actually challenge the assumptions of the unlimited amount of their oil supplies. And it hit a nerve I would never ever have expected because I wasn’t a household name – I think I am today in Saudi Arabia – I was just an investment banker in Houston. It was the same sort of reaction if someone went to the Vatican and said, “I hate to tell you all this, but there really isn’t a God, and there isn’t a Pope.” And out of that came a massive public relations campaign by the senior management of Saudi Aramco, the state oil company, and the Petroleum Ministry that effectively has said, “we can produce 10 million or 12 million or 15 million barrels a day for 50 to 100 years. Our 260 billion barrels of proven reserves, there’s this conservative number we can easily add another 200 billion, and we can still add another 200 billion we have yet to discover”. And I actually think that they believe that, which is far more dangerous than “it’s just a political statement.”

JIM: Now the thesis of your book is Saudi production is very near its peak...

MATT: I decided that this book was going to be so controversial that I really tried my darnedest to avoid a bunch of very specific conclusions that people could shoot holes in them: “how would you know that?” But I’ve had enough time now to reflect on everything I wrote about, and also feedback from lots of technical people that said, “you know what, what you triggered in the memory of what was going on in the 70s”, and etc, etc. I think it’s highly likely that they’ve actually exceeded sustainable peak production already. And I think at the current rates they are producing these old fields, each of the fields risks entering into a rapid production collapse.[9:03]

JIM: If this is indeed the case then, by assumption, we have to assume global peak is at hand then.

MATT: Absolutely. Once it’s clear that Saudi Arabia cannot sustain increases in its production on a sustained basis, then in my opinion, with a certainty of 99.9% the world has actually passed sustainable peak production. Because one of the reasons all of these supply models always have Saudi Arabia producing 25 million bpd by 2025 is that there isn’t another country on earth that has the potential to raise their production more than 1 or 2 million bpd at best.

I had started writing months ago that we were already at or even past peak oil based on another writer and here we have Simmons saying that we are at peak now. Oil prices went up over 1000% from 1972 to 1980 before falling because of reduced demand and new supplies. What is being said now is that there are not new supplies like on the scale of last time.