John Hofmeister, president of Royal Dutch Shell’s US operations, was interviewed about peak oil and the supply issue on CNBC’s Squawk Box. He attacked the peak oil theory as popularized by Matthew Simmons, the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.” The comments from Hofmeister and a summary of the interview can be found here and Matthew Simmons response can be viewed at this link.
Some of the most interesting statements from were:
“The peak oil theory has swamped the world — God bless Matt Simmons,” Hofmeister told CNBC. Simmons is mistaken, said Hofmeister, because he is overly focused on a single country: Saudi Arabia, the world’s largest exporter, and OPEC swing producer.
Simmons is also off the mark, Hofmeister contends because he excludes unconventional sources of oil such as the oil sands of Canada, where Shell is already active.
Matthew Simmons made the following remarks when he confronted the comments from Hofmeister:
CNBC: What’s your response to critics like Hofmeister?
Simmons: There is a kind of schizophrenia within the likes of Shell where the chairman says, “We think by 2012 global demand will exceed conventional supply, ” and yet Hofmeister says the idea that we are ever going to have peak oil is ridiculous.
CNBC: But he’s suggesting you are leaving out unconventional sources of energy in your calculations.
Simmons: They make the distinction [between conventional and unconventional], but they don’t seem to make the connection about the vast difference of flow. They are so hung up on the total estimated volume. Once they start a project, they say, “Well, the reserves last forever so we can book a million barrels of reserves.”
The energy that is consumed to get oil out of the tar sands of Canada — in massive amounts of potable water and natural gas is so vast you are turning gold into lead. What you get out is a very low-quality amount of oil that has to be upgraded and diluted with high-quality oil to get synthetic crude. What I can’t figure out is why the executives of these oil companies don’t understand that.
CNBC: So, what is your prognosis for prices?
Simmons: I think prices have to go way higher. The sooner people get used to the fact that we are still living in a fool’s paradise, the better you just can not argue that $100 a barrel is expensive when you realize it is 15 cents a cup — do you know anything other than crude oil that sells for 15 cents a cup? I know wine doesn’t, bottled water doesn’t.