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Is Matt Simmons Credible?

General Ideas

The topic is touchy because Matt Simmons has long been revered in the energy business, and some of his fans will be upset with me for writing this. But Simmons has lately been making what I feel are very irresponsible and sensational claims that don’t hold up to scrutiny. So I will review his history here to show a pattern of Simmons making sensational predictions based on meager and/or misinterpreted data; predictions that later proved to be grossly inaccurate.

I think something happens to the psyche when the media pay attention to you for so long. You stop all self criticism, believing that whatever thoughts come to your mind have validity and import. In truth, it doesn’t matter if you are eventually proven wrong, because by then you’re off on the next topic.

Simmons’ Blunders at ASPO 2008

In my previous essay on debunking Simmons, I provided some examples of Simmons making factually incorrect statements. These statements were based on him not having enough information (or bad information), yet still speaking authoritatively on a topic. There were two later examples from his talk at the 2008 ASPO conference — where I also presented. (See his presentation here). He claimed in his presentation that we don’t have a good idea of our gasoline inventories, and because of Hurricane Ike we were just beginning a gasoline crisis that could bring the entire country to a halt. He spun quite a frightening tale, and I could see the shock on some people’s faces.

Contrary to Matt’s argument, the evidence was just the opposite. Even as he was speaking, refineries were coming back online from the hurricane outages and inventories were recovering. I caught up with Simmons later and told him that I used to work in a group in a refinery that provided inventory data to the Department of Energy, and we do indeed have very good data on gasoline inventories. So his fundamental premise was wrong. I was asked about Matt’s comments on a later panel session, and I said that gasoline inventories were beginning to recover and that I predicted they would be higher in a month. They were. Matt’s frightening scenario based on Hurricane Ike didn’t come to pass.

Another example is his argument about the $100 trillion corrosion issue in the oil industry. The gist is that he argues that the oil industry is full of rusting infrastructure, and he questions whether we have the money or even the iron resources to fix the problem. Further, he questions aloud how it is that he – Matt Simmons, investment banker – has ‘discovered’ this problem that the oil industry has missed. I won’t go into all of the reasons that Matt is way off the mark on this, as that would be an essay in itself. A corrosion engineer at The Oil Drum once weighed in on this issue, and explained that corrosion is well-understood, and not something that Simmons discovered. Oil companies are full of corrosion engineers who work to replace corroded equipment as needed. But it was another oil-related “crisis” Simmons “discovered” and he ran with it.

RSquared Energy Blog

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