Evan Hughes


The Accidental Environmentalist

Investment banker Matthew Simmons, who made his fortune in the oil industry, now wants everyone to know that our oil is drying up.

Matthew Simmons, head of the Houston-based investment firm Simmons and Company, has made a fortune by investing billions of dollars in the oil and gas industry. Increasingly, though, Simmons has been telling the industry what it doesn’t want to hear—that our planet’s oil is in short supply. Now considered one of the world’s leading experts on the theory of peak oil—which says we are near or have already reached the peak capacity for oil production worldwide—George W. Bush’s former energy advisor foresees a steep decline in oil output and profits. His predictions, outlined in his book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, took the industry by storm, naming names and contending that Saudi Arabia doesn’t have as much oil as it claims. With barrel prices passing the hundred-dollar mark at the beginning of this year, Simmons’s predictions seem to have more gravity than ever. But, unlike many like-minded thinkers, Simmons believes that current alternative energy strategies are pipe dreams, environmentalists are deeply misguided, and global warming is nowhere close to our largest problem. GOOD sat down with him on the porch of his stately Maine home to get his take on the future of the energy business.

GOOD: You’re making money servicing oil rigs while you’re foreseeing the industry drying up. Is that bad for business?

MATTHEW SIMMONS: Whether my company’s opinion is good or bad for the industry is neither here nor there. Even though theoretically we’re set up to do business with the major oil companies, they think we’re a wacky firm, and we think they’re wacky. They’ve never figured out where the industry is. In the 40 years I’ve been studying this they’ve been wrong every single time. They don’t seem to ever read books.

How did you get into the energy business?

While at Harvard Business School I met a man whose company was providing the diving services for offshore platforms and rigs. He was about to sell the company and I said, “What if you raised some venture capital?” He said “Can you do that for me?” By the end of five years my company had pretty well established itself as the experts in the oil-services industry, because nobody else understood it.

Have you been politically involved? You did some consulting for President Bush before he was elected.

I made the mistake of pulling aside President Bush’s first cousin in early March of 2000. I told him about a conversation I had with Secretary [of Energy] Bill Richardson’s assistant, who had just visited the OPEC countries to see exactly how much spare [oil-production] capacity they had left. I said, “When you have someone who is the head of U.S. oil policy call you and [say ‘shit!’] about five times in 20 seconds, this is so much worse than what they’ve warned us about.” I said, “Between now and the election, if this all breaks out and Bush is misinformed, he can mispronounce every head of state in the world, but this, this will sink you.” And that dragged me into helping create the comprehensive energy plan put forth by Bush when he was running.

The major oil companies have never figured out where the industry is. In the 40 years I’ve been studying this, they’ve been wrong every single time. They don’t seem to ever read books.

You grew up in a Republican family. Who are you backing in the 2008 election?

One of my political heroes was George Romney, whom I got to know well. That’s why I’m a big supporter of his son, Mitt Romney. But I’d say that over the years in the energy business I got as disgusted with some of the mistakes the Republican Party was making as well as the Democratic Party.

When you consulted for the Bush campaign, were you making dire predictions?

They were dire enough to scare some people. I didn’t even understand at the time what the term “peak oil” meant. What I did understand was how our spare capacity was evaporating. We needed to start diversifying our supplies. The mindset at the time was that technology had driven down extraction costs and that we would have a long era of overcapacity, and my views just could not have been any sharper that these guys didn’t have a clue what they were talking about.

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