Last time it was Exxon, now it is shell. Listen carefully, peak oil is a myth! Hubbert was wrong, Simmons is wrong.

By Jerome R. Corsi
© 2008 WorldNetDaily

Shell U.S. President John Hofmeister
John Hofmeister, the Houston-based president of Shell Oil's U.S. operations, expressed doubt about the validity of peak oil theory in an appearance on CNBC's Squawk Box show.

"The peak oil theory has really swamped the world. God bless Matt Simmons," Hofmeister told CNBC anchor Carl Quintanilla, according to a transcript provided to WND by CNBC. "His assumptions are correct based on his hypotheses, but his hypotheses are too narrow."

Matt Simmons, a Houston-based investment banker who specializes in the energy industry, is widely known for his 2005 book, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," in which he analyzed oil depletion data from Saudi Arabian wells.

The peak oil theory argues the world's oil resources are finite and will be completely exhausted at a future date.
Simmons, one of the most vocal and visible of the peak oil advocates in the industry today, has also been a frequent television guest arguing that the world is running out of oil.

In a recent YouTube.com-archived appearance on Bloomberg TV, Simmons argued the world has hit peak oil now, predicting prices as high as $300 a barrel

The peak oil theory, first espoused by Shell Oil geoscientist M. King Hubbert in 1956, has come under increasing criticism in recent years, as repeated predictions of world oil depletion have failed to match empirical data documenting increasing reserves.

For instance, data produced by the U.S. Department of Energy's Energy Information Administration currently shows 1.3 trillion barrels of proven oil reserves worldwide, more than ever in recorded history, despite a doubling in world oil consumption since the 1970s.

In what has become a contentious worldwide debate over whether peak oil is fact or fiction, Simmons dismisses statistics that are not consistent with his depletion models.

The Energy Information Administration "has been as inept at forecasting oil outlook in both production and prices as anyone," Simmons told WND in an e-mail, "yet so few ever remember their awful forecasts."

Hofmeister explained to the CNBC audience why he believed Simmons' hypotheses were too narrow.

"In other words, Simmons is looking at conventional oil only," Hofmeister said. "In the industry, we look at unconventional oil as well."

Unconventional oil is a reference to oil that is not found as crude oil in reservoirs contained in sedimentary rock layers just below the surface of the earth.

An example of unconventional oil is the oil sands in Alberta, Canada, from which oil is produced.

When President Bush took office on Jan. 20, 2001, the price of oil was approximately $24 a barrel, too low for the oil sands to be converted to oil economically.

But now, with the price of oil hovering near $100 a barrel, conversion of the oil sands has become economically feasible. Canada has become the largest supplier of foreign oil to the U.S., supplying the U.S. with more than 70 million barrels of oil a month, according to current EIA statistics.

Hofmeister also questioned whether Simmons' models accurately estimated the probability of new discoveries of previously unknown oil reserves.

"Simmons is also basing his conclusions on a particular study of one country, Saudi Arabia, while there are a whole lot of other reservoirs around the world we're still discovering," Hofmeister continued. "Some day we will peak, but not because we don't have enough oil."

For instance, WND recently reported Brazil's announcement of the discovery of a new ultra-deep offshore oil field in the Atlantic Ocean, containing an estimated 5 to 8 billion barrels of oil, enough to expand the country's proven reserves by 40 to 50 percent.

Again, Simmons is dismissive.

"The great Brazil find, as best laid out in the February issue of World Oil, is a great example of a handful of extremely expensive, rank wildcat wells finding at least traces of hydrocarbons," he said.

"But until scores of other wells are both flow-tested and also cored, there is no solid idea of how much oil might ever be recovered," he continued. "Given the severe deepwater rig shortage, it might take a decade or more to genuinely test the Santos Basin."

"I would be delighted to be wrong on all this," Simmons wrote, "but too much hard data is too specific, and the optimist case is all faith-based theories."

Brazil disagrees with Simmons' pessimistic outlook.

Sergio Gabrielli, the chief executive officer of the state-run oil firm Petroleo Brasileiro SA claims the new find off the coast of Brazil may contain as much as 80 billions barrels in oil reserves which Brazil is moving to commercially exploit and further explore right now.

Simmons' pessimistic focus on oil depletion statistics are today being contested, even by traditional oil industry experts such as Daniel Yergin and his Cambridge Energy Research Associates, or CERA, in Cambridge, Mass.

"This is the fifth time that the world is said to be running out of oil," Yergin says in industry speeches. "Each time, technology and the opening of new frontier areas has banished the specter of decline. There's no reason to think that technology is finished this time."

Yergin came to world fame in the oil industry with the publication in 1991 of his now-classic book, "The Prize: The Epic Quest for Oil, Money & Power."

A Jan 18 press release on the CERA website presents additional data questioning one of Simmons' key assumptions.

In a study that examined oil depletion data from 811 separate oil fields accounting for about two-thirds of current global production and half of the total proved and probable conventional oil reserve base, CERA concluded the aggregate global decline rate is 4.5 percent, not the 8 percent cited in many studies.

The study, drawing from a source CERA described as "the most extensive field production database in the world," demonstrated lower decline rates in recent years due to better reservoir management practices and the impact of new technology.

CERA concluded the new data means "no near-term peak oil" is likely, directly countering the predictions of peak oil advocates such as Simmons.

Finally, as WND recently reported, new scientific discoveries have produced important evidence supporting the abiotic theory of the origin of oil.

Scientists have recently reported abiotic liquid hydrocarbons exuding from the mantle of the earth in fissures such as the Lost City Hydrothermal Field on the bottom of the Atlantic Ocean and abundant abiotic liquid methane found on Titan, the giant moon of Saturn, as found by the Cassini-Huygens mission jointly launched by NASA, the European Space Agency and the Italian Space Agency.

Traditional petro-geologists have maintained that oil is biological in origin, arising from organic material deposited in sedimentary soil.

The organic theory of the origin of oil has served as a logical underpinning of the tautology at the heart of the peak oil theory.

Only a finite amount of biological material was deposited in sedimentary soil capable of forming oil, so there has to be a finite amount of oil.

The abiotic theory suggests oil is formed naturally in the mantle of the earth by chemical reactions such as are described in the Fisher-Tropsch equations the Nazis developed to make synthetic oil from coal prior to World War II.

The abiotic theory would suggest more deep-earth discoveries of oil should be forthcoming, especially with new technology to find and recover cost-effectively offshore oil.

With more than 70 percent of the earth covered by water, much previously unexplored territory remains to be explored for oil, as ultra-deep drilling technology continues to progress.

wnd.com/index.php