Soothsayer Foresees Holy War Over Energy Crisis

Every spare molecule of gas, drop of oil and electron is being used up and the world faces a "meltdown" of its economy unless more supplies are found, a leading energy pundit warned a capacity crowd last week at the Offshore Technology Conference in Houston.

Matthew R. Simmons had no cheery forecast for the global energy professionals gathered. Instead, the president of Houston-based Simmons & Co. International talked of the burdens facing the industry in both the short- and long-term. Calling the present lack of capacity a crisis, Simmons said it would take years, conservation and an unknown amount of capital to resolve.

"How did we get into this mess? We have had 30 years of energy mistakes," which will take years and expanded exploration and production to resolve, Simmons said. Although the 1970s energy crises were laid at the feet of the Middle Eastern oil cartel, Simmons said that the political problems were then compounded by "20 years of flat energy prices," which lulled politicians and consumers into using up the "cushion."

That cushion has now been used up, and on top of that, no infrastructure exists to alleviate the shortages --- a lack of manpower and old equipment have left the world in poor shape to replenish supplies.

"The present energy infrastructure is old and decaying. We need to rebuild, refurbish or replace pipelines, tanks, transmission lines, rigs, wells, power plants, and on and on," Simmons said. "The bubble has finally burst."

Though many energy professionals consider offshore drilling key to the future oil and gas supply, Simmons isn't so sure. "The offshore is very fragile.....and much of the base is also long in the tooth."

Simmons said the United States and the rest of the world might never know the "luxury of giant oil and gas fields of years ago." He said in the past 25 years, there have only been three giant new fields, with the only one in North America being drilled in Mexico. Though he said there remains a plentiful amount of oil and gas supplies, "giant capacity is a thing of the past."

Warning that a "serious energy crisis is on our doorsteps," Simmons said that the United States was about to "wage an energy war." Without that level of massive change, it will "spell the end of prosperity." Simmons said the capital needed to sustain the efforts could be compared to rebuilding Europe following World War II.

The Houston consultant, who is on President George W. Bush's energy transition team, said he expects Bush or Vice President Dick Cheney to detail the severity of the U.S. energy crisis in a speech within the next month (see related story). He would not disclose what he expects to hear in the speech, but he said it would be no different from what he has been talking about.

"Our president is really worried about the energy problem," Simmons said. "What worries me, is that California has had seven months to solve its problems, and so far, it hasn't learned anything. California has to go in the direction of non-growth for a while so that it can ramp up some power plants." But, he said, that scenario is not what the rest of the country could stand. "We could have a little holy war over this. We can't conserve our way out of the problem."

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