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Saudi Oil Shocker; Energy Insider Says Americans and the Global Economy Will Be in for a Jolt When Oil Production Peaks in Saudi Arabia

Posted on: Monday, 26 September 2005, 12:00 CDT

Talk about good timing.

Just as gas prices had soared over $3 a gallon this year, Matthew R. Simmons came out with a book called "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy" (Wiley, $24.95).

Simmons, who has a home in Rockport, is chairman and CEO of Simmons & Company International, a Houston-based investment bank that specializes in the energy industry.

In his book, Simmons explores the Saudi Arabian oil fields as the world's most plentiful, low-cost oil source, a source that soon could be facing an irreversible decline in output.

Q: What gave you the idea to write this book?

A: I began researching the issues covered in the book after I got a sense that Saudi Arabia was spending far too much money and effort to produce their oil than made sense, if indeed, they really had 90 or 100 years of proven reserves to deliver to the world. It was only after I read about 150 technical papers that I decided to turn from writing a "white paper" that would be sent to several hundred "energy friends" to tackling turning all this information into a real book.

Q: What percentage of oil and gas used in America comes from Saudi Arabia? A: The United States only gets about 15 percent of its imported crude oil from Saudi Arabia and only 7 percent of the oil we use each day. However, Saudi Arabia is the world's biggest oil producer and also bigger than the number 4 through 6 producing countries combined. Even more important is the fact that Saudi Arabia is the only country that experts assumed could add another 10 to 15 million barrels a day of added supply when demand needed this much added oil. Q: What evidence is there that the Saudi oil supply might be running out? What are the geological circumstances that might be behind a potential problem in that country?

A: The evidence of my book came from digesting the content of about 250 technical papers that had been written and presented at various energy forums around the world. The book's bibliography lists 235 specific papers. All were written by employees and vendors to Saudi Arabia's oil company. Q: How soon might the Saudi oil situation become a major problem to us in the U.S.?

A: If Saudi Arabia is close to its peak sustained oil output, it is not a U.S. issue but a global issue as it means that world oil output is also peaking. Peaking does not mean we are running out of oil. It does mean that oil use can no longer grow. Q: What sort of access did you have to Saudi officials and oil executives while writing this?

A: I went out of my way to not talk with Saudi Oil officials as I did my research as I did not want to be either biased by their views or persuaded not to keep doing research. But the technical papers that formed the base of all my research were all written by Saudi Arabian experts, so they "did the talking," and I merely summarized what they collectively said.

Q: How might politics in Saudi Arabia play a role in causing major oil problems for the world? Is the government more volatile than most Americans know?

A: I have intentionally avoided tying my oil research into geopolitics about Saudi Arabia. There are already too many Saudi- bashing books and stories. I am actually a big supporter of the valuable role the kingdom played in delivering the world inexpensive oil. Strangely, that became their unintentional oil curse.

Q: Which makes more sense in your opinion, looking for oil in other areas or developing technologies that aren't oil-dependent?

A: When Saudi Arabia's oil has passed its peak, there are no other parts of the world that can even pretend to make up the difference. There is always a chance that a new Middle East of oil might be found, but it has been decades since we found a major new oil basin. So the answer has to come through creating a far less oil- intensive global economy.

Q: What impact does the war in Iraq have, if any, on the oil situation in Saudi Arabia or the rest of the world?

A: In my opinion, Iraq's oil future is far more bleak than Saudi Arabia, even in the best of peaceful times.

Q: Has anyone from the federal government contacted you about your book? Have oil companies contacted you?

A: I have not tried to evoke any official response to the book from our government or any others. I do know that the book is being read and discussed by people in governments and oil companies around the world. Some senior people in the oil and gas industry disagree with my conclusions but have no specific facts to rebut my views. In contrast, I have gotten praise from hundreds of senior executives throughout the industry and many executives have asked me to sign copies they purchased for their friends.

Q: Is there anything average citizens can do about "the coming Saudi oil shock"?

A: The average citizen needs to begin appreciating the oil today is still extremely inexpensive: $65 per barrel for oil is only 10 cents a cup. Paying $3.20 for gasoline, including taxes, is only 20 cents a cup. A cup of gasoline lets one to six people drive a mile and a half in about two minutes. Try getting a bike rider to take you the same distance for 20 cents.

Staff Writer Ray Routhier can be contacted at 791-6454 or at:

rrouthier@pressherald.com

Source: Portland Press Herald

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