U.S. Energy Policy Issues

in Peak Oil by

Abstract for
Uppsala, Sweden, May 23-25, 2002
Organized by Uppsala University and ASPO, the Association for the Study of Peak Oil

U.S. Energy Policy Issues
By Matthew R. Simmons
President, Simmons & Company International

The issue of the world’s future decline rates will have an enormous impact on the United States’ energy future, simply because we use more oil and gas than any other country in the world. Not only is this depletion issue critical to understanding America’s domestic oil and gas supplies, but it also helps us identify regions of the world on which we need to rely to ensure a steady and growing supply of imported oil and natural gas.

The U.S. is also the first country to experience a significant depletion surprise. It occurred in 1970 or 1971 when we finally peaked as the world’s leading oil producer, just as M. King Hubbert predicted we would. Once the U.S. reached its peak production rate (which occurred before the advent of Alaskan or deepwater oil), we produced over 9.5 million barrels per day. Years later, this same region’s production had fallen to just under 7 Mbpd, despite a quadrupling in oil well completions. Today, this region’s oil production has dropped to only 3.5 Mbpd. When production peaks, the declines follow regardless of how intensively one drills additional wells.

The USA is experiencing a similar unsettling pattern in its natural gas supply, which comes almost 30 years after our oil surprise.

For nearly a decade U.S. natural gas completions averaged about 9,000 per year. In 1999, the USA completed 10,200 new gas wells. This number rose by 50% in 2000, and in 2001 we completed nearly 20,000 wells. However, daily supply of natural gas stayed flat. Now drilling has declined by over 40%. There are signs that the U.S. production base is about to take a steep dive. It will come as a great shock to even most natural gas producers because of the lack of knowledge and data indicating the relentless and growing declines in so many key producing regions of our country.

How the U.S. energy policy needs to address these issues is the subject of my intended remarks during this important forum.

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