A Charred Life 
The Gospel According to Matthew
For more than twenty years, an extremely successful Houston investment banker has been trying to convince the world that the end (of oil) is nigh. Now that people are finally starting to listen, is it too late?
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Simmons’s Web site, immonsco-intl.com, which had just shy of 10 million visitors in 2006 alone, is designed to spread the word with a helpful if somewhat daunting compendium of gloomy speeches, papers, and PowerPoint presentations (“A Hungry World in Search of More Oil,” “Autopsy of Our Energy Crisis,” “Summer’s Over: Preparing for a Winter of Discontent”). There is an ever-growing list of Web sites devoted to peak oil: theoildrum.com, oilcrash.com, and peakoilblues.com, a site dedicated solely to the emotional fallout of declining oil production. All hail Simmons as a hero and pose the kinds of questions no one much wants to think about answering. For instance: “If your family were permitted to purchase only five gallons of gasoline per week, how would this change your lifestyle?” Or the somewhat perkier query: “Given the likelihood of oil shortages in the future, what might be good careers for young people making choices today?”
This growing anxiety may help to explain why one resource that seems to be in decline along with the availability of fossil fuels is the optimism that was always so intrinsic to the oil-and-gas business. It used to be that if you went broke today, you could always start over tomorrow, and in the meantime the country club would keep your membership on the books until your next well came in. But suddenly people in Houston and beyond are beginning to suspect that there might not be many more giant deposits—in the North Sea, the Middle East, Venezuela, or even the deep end of the ocean—so somebody had better start talking about life after oil.
That job has fallen to Simmons, thanks in large part to his evangelical zeal. “Peak oil is not as complicated a topic as people think it is,” he likes to say. But getting people to grasp the ramifications—and adapt—is much harder.
It is a suspiciously warm Tuesday in early December, and Simmons has just flown from Houston to Miami on a chartered plane to give a speech to the International Regulators Offshore Safety Conference, a worldwide organization dedicated to offshore rig safety. Simmons never charges for these presentations because he feels they are the perfect marketing opportunity for his investment firm. “Merrill Lynch and Goldman Sachs have spent billions of dollars on advertising. We don’t spend any,” he says, his eyes twinkling with the thought of more than a few pennies saved. “When I speak, I get a sublime introduction. It’s branding of the highest order.”
Today he wears a natty battleship-blue suit set off with a white monogrammed shirt and a theme-appropriate camel-patterned Ferragamo tie. Simmons’ speech is titled “Is Our Energy System ‘Sustainable’? ” He has already told me on the ride over that the answer is no, but after a decade of being known as Dr. Gloom, he likes to present his information as coolly as possible. “If you try to make it dramatic . . . well, it’s dramatic enough,” he says. He’s convinced too that “reasonably intelligent people can absorb bad news as long as it isn’t presented smugly.”
After what is indeed a very florid intro given by a Swede (more than twenty nations are represented at this meeting), Simmons takes the stage confidently. Screens on either side of him display his slides of doom. In about fifteen minutes, he goes through a variation on his usual speech. Our refineries are decrepit. Demand from developing countries will exponentially increase. Seventeen percent of our daily supply comes from only ten supergiant fields, and if their reported production numbers are correct, all are in decline. The North Sea is depleted. Brazil is problematic. The “easy era” of offshore oil and gas is over.
“These aren’t new fields,” Simmons tells the crowd. “The newer fields are aging at an even faster rate, because the production is so intense to satisfy demand.” He moves on to the incredible increase in the price of drilling ($2 billion to $4 billion is now the norm; estimates for a new project in the Caspian Sea are about $137 billion) and the protracted time it will take to get new wells online.
The optimism espoused by critics of peak oil is “faith based,” he tells the crowd, dependent on questionable reserve reports, the unproven ability of technology to come to the rescue, and the highly theoretical availability of vast Canadian tar sands to replace the light, sweet crude of today. To counter those who say that market corrections will bring oil prices down, he projects a slide showing that demand for oil is currently “insatiable” at a time when many oil basins have already peaked. Need is so great here in the U.S. and in developing countries that improved technology only speeds the depletion of what’s left in the ground. Oil demand, Simmons says, could exceed 115 million barrels a day by 2020, an amount that will still leave China and India “energy paupers.”
Simmons’s critics often cite past price collapses, which theoretically indicate that there remains plenty of oil that can be provided with the turn of a well-timed spigot. But price declines have been short-lived, Simmons says, and while production has accelerated over the past decade, prices have soared. The best he has to offer is that high oil prices—up to $200 and $300 a barrel—could have a positive outcome, but only if the profits are spent on exploring, rebuilding infrastructure, and closing the ever-widening economic gap among people in the politically unstable nations of the oil-rich Middle East.
Clicking to his last slide, titled “It Is Easy to Miss an Approaching Crisis,” Simmons quotes Alexis de Tocqueville: “Revolutions, before they happen, appear to be impossible and after they occur they appeared to have been inevitable.” The illustration is of a rearview mirror reflecting rusting oil barrels, a drilling rig, storage tanks, a list of rising oil prices, and the words “Objects in mirror are closer than they appear.”
Afterward, Simmons makes his way quickly to the elevator. He usually stays around to pick up industry scuttlebutt about declining fields and faulty data, but he’s headed for South Africa the next morning, so he punches the button briskly.
A tall gray-haired man stops to say hello. “Great presentation,” he says.
“It’s not great news,” Simmons responds.
The man nods. “Most of us are gonna go jump off our balconies about now.”
Suicidal depression is not exactly the response Simmons would like his speeches to provoke, but it is preferable to the derision or indifference that his pitch used to receive. On the jet speeding back to Houston, with the Gulf of Mexico shimmering far below us, he explains his conversion from conventional businessman to pariah to, perhaps, visionary.
Born in Utah, in 1943, he grew up comfortably in a large, actively Mormon family believing he would follow his father into commercial banking. He had a hearty American childhood, reading Mad magazine and spending summers working on a cattle ranch. A naturally competitive child, he found his way in high school to the debate team, where he excelled. He still remembers the dicey topics—such as Nuclear Disarmament—and that he lost a state championship by being overconfident. The loss taught him that “the guy who had the best data owned the floor.”
After graduating from Harvard Business School, Simmons ignored the entreaties of professors who wanted him to teach and instead set about doing what he liked best, raising capital. He worked out of a small office in a tony section of Boston (“If you work on a shoestring, you don’t look like a serious person,” he says). His introduction to the world of oil and gas came in 1969, when he traveled to Palm Springs, California, to meet with Laddie Handelman, an offshore diving operator whom Simmons calls the Thomas Edison of deepwater drilling. Handelman wanted to sell his company, and Simmons put the deal together.
But this was only the beginning. Simmons was one of the first to see that the oil field—services industry could be more than just an adjunct to the oil business; instead, it could be—should be—a separate entity. (“The profit margins were so good!”) Soon his life took on a rhythm familiar to many oilmen. One year after the 1973 energy crisis, Simmons opened his own firm with his brother, L. E. Simmons, in Houston. They drew business from companies in Texas, Louisiana, and Alaska and from firms in the United Kingdom working in the North Sea. In 1975 he had an IPO for Handelman’s company, now known as Oceaneering, in which the investors’ value grew sixfold. Times were great. By 1979 oil was on its way to $50 a barrel, and Simmons was becoming a very rich man. Oil and gas had been good to him. He diligently studied the best journals and newsletters and thought he knew everything there was to know.
So, like everyone else, he was dumbfounded when oil collapsed in 1982. “For two or three years I couldn’t believe we’d survive,” he says, and in fact, Simmons and Co. came perilously close to shutting its doors.
The devastation, however, led Simmons to an epiphany. Instead of attributing his losses to plain old bad luck, he began analyzing the raw data himself. Looking at the numbers, he realized he should have seen the crash coming. Then and there he decided he would never again rely on “a club of energy economists.” He would rely on his own instincts and his own raw data and disregard the so-called experts.
Simmons’s research further suggested that the depression in oil prices was going to last for quite some time. He began traveling the country, offering this prediction and his analysis that the industry would not survive without consolidation. “Boy, did people in energy think that was stupid,” he says.
Still, Simmons persisted. “You know the Vietnam general who said in order to save the village we had to destroy it?” he told theoildrum.com in 2005. “To save the oil services, we had to destroy it. Some of the projects we worked on . . . we did a final analysis that said if these three companies come together, they can fire four thousand people and one thousand people will have sustainable jobs. I learned how to go to industry forums and tell people they all had AIDS.”
Simmons thought that people would listen to reason if it meant avoiding financial destruction. And many did accept his views. He put together the deal for the company that became Texas Eastern; he assisted the Norton Company in buying 50 percent of Eastman Christensen in the spring of 1989 and then, a few months later, handled the company’s $550 million sale to Baker Hughes. “What a wild way to end the eighties!” he recalls. Leaner and meaner, the industry surged forward.
Then, of course, oil prices collapsed again in the late nineties, the result of tremendous oversupply. The size of the glut was estimated at about 3.5 million barrels a day. Conventional wisdom held that this had been created by the failure of the Asian markets, OPEC’s overproduction, and the collapse of the Soviet Union. Experts claimed that demand had peaked just as new technologies were getting the oil out of the ground faster than ever.
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