Peak Oil and Peak Profits

Matthew Simmons, an adviser to President George Bush and chairman of the Wall Street energy investment company Simmons, has told a conference of oil industry analysts, government officials and academics that Middle Eastern countries may have far less than officially stated and that oil prices could double to more than $100 a barrel within three years, triggering economic collapse.

Speaking in Edinburgh, Simmons called for an independent assessment of global oil reserves, saying:

There is a big chance that Saudi Arabia actually peaked production in 1981. We have no reliable data. Our data collection system for oil is rubbish. I suspect that if we had, we would find that we are over-producing in most of our major fields and that we should be throttling back. We may have passed that point.

Demand is pulling away from supply...and we have to ask whether we have the resources that we think we do. It could be catastrophic if we do not anticipate when peak oil comes.

Several other industry insiders agree with him. Colin Campbell, former vice-president of Fina and chief geologist of the oil giant Amoco says:

The real issue is not the actual date of peak production - which I believe is next year - but what happens during the decline of production. I think we are in for an extended period of restricted economic activity. I do not think that we will adjust very smoothly.

While Chris Skrebowski, of the Energy Institute in London, points to Exxon's estimate that the world is using 5% of it's total reserves every year and thinks:

Norway, Venezuela, the UK and Indonesia and many others are all declining production. I expect Denmark, Malaysia, China, Mexico and Brunei to peak within three years...I estimate that we have, at best, 32 months before [the crisis] hits.

The big oil companies don't care right now, of course. They are riding high on huge profits from the higher cost of crude oil. Exxon had record profits in the last year and BP has just announced that the first three months of the year, the UK's biggest listed company made $5.49bn (£2.87bn). The figure, the equivalent to earnings of £1.3m an hour, comes two months after BP announced a record annual profit of £8.7bn.

So, we can add the massive economic collapse following peak oil to the trade deficit, the budget deficit, China and others thinking about dumping the weak dollar, the bursting of the housing bubble, tax cuts for the rich which only make the country poorer, the inevitable drop in stocks which has to come from all this and Bush's borrowing policies - which are akin to standing outside your house with a big wad of cash shouting about how much money you have while behind you the house is empty for you've sold the furniture at bargain rates to raise the cash. All of this to hit by 2008 - 2010.

At which point Bush and his appointed cronies will be sunning themselves in some tax haven and laughing all the way to the offshore bank - no matter which party gets to inherit the mess.