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Matthew Simmons, "Crazy Uncle" of the Oil Patch, Spoke Truth to Power

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Matt Simmons was one of the oil industry's most original thinkers, unafraid to call things as he saw them and, as a former White House adviser, somehow able to convince George Bush that the U.S. was addicted to oil.

"He knew that the multinationals and state oil companies had netted most of the world's big petroleum fish 50 years ago and that the world's major oil fields, like the world's major fisheries, were all in a state of depletion," writes journalist Andrew Nikiforuk in this thoughtful eulogy for Simmons, who passed away on August 8 after suffering a heart attack at home in Maine. He was 67.

Simmons' name had most recently made the headlines this summer when the banker made some controversial comments about BP, including one prediction that the company would have to file for bankruptcy, which now seems unlikely.

His remarks caused his former investment bank, Simmons & Company, to cut all ties to its founder, who had been chairman emeritus. At one time, however, Simmons & Company was the institution that journalists could rely on for such daring, non-conformist opinions. Nikiforuk writes:
Every week I'd visit the website of Simmons & Company, one of the world's top energy bankers in Houston, and I read over one of banker's latest presentations. They had titles like "Energy Markets in Chaos"; "Has Twilight in Energy Desert Begun!" or "What Kangaroo Court Created Our Oil and Gas Markets?"

It was like going to AIG's website and finding an honest account of unscrupulous banking practices and toxic derivatives.

And if Simmons was wrong about BP, Nikiforuk reminds us that he was right about one larger issue: 

In the 1990s Simmons annoyed many members of the oil patch by questioning conventional group think in the industry. When energy gurus predicted oil demand would not grow beyond 60 million barrels a day, Simmons warned that demand was growing too rapidly as it crossed 70 million barrels by 1995. When the gurus said that oil supplies would endlessly surge, Simmons documented the steady depletion of oil fields in the North Sea and Middle East.

Realizing all was not well in the energy world in 2002, Simmons reread The Club of Rome's report The Limits To Growth. Since its publication in 1972 traditional economists had trashed the report as a "doomsday book." But in his revisit Simmons found a sober account of how exponential growth and unbridled energy consumption would lead to constraints or a decline in industrial activity by 2050.

"In hindsight," he said, "The Club of Rome turned out to be right. We simply wasted 30 important years by ignoring this work."

In 2007, Simmons launched Ocean Energy Institute, a think-tank and venture capital fund. Read more about his opinions on the future of oil, transportation, even the related problems of high obesity rates and food production, here.
POSITION:  No positions in stocks mentioned.