Peak Oil, the Chamber, and a Regional Energy Strategy
by Ron McLinden, THB Urban Issues Chair

Matt Simmons, oil industry investment advisor and author (Twilight in the Desert: the Coming Saudi Oil Shock and the World Economy) spoke on February 21 to an audience of about 150 at a luncheon sponsored by the Greater Kansas City Chamber of Commerce.

Widely respected in the industry, Simmons has become one of the world’s leading “messengers” on the issue of “Peak Oil”—the principle that once half of a resource like oil has been extracted, the RATE of production won’t grow any more, but will instead decline.

Simmons says world oil production has about peaked—currently about 85 million barrels per day—and that a plateau and decline in production will follow. Global demand is projected to grow to about 120 million barrels per day over the next 25 years or so, but production will likely decline to about 60–70 percent of what it is now. The result: significantly higher prices for oil, and thus for all products derived from oil—chemicals, fertilizers, plastics, etc. The price of all other forms of energy will rise along with oil.

Since cheap energy underlies our entire economy, Simmons says, we are in for rough times ahead. Simmons’ own recommendations for the future: shift transportation away from trucks and toward more energy efficient modes like rail; encourage telecommuting; grow more food locally instead of transporting it thousands of miles; and gradually reverse globalization in favor of local economies.

While he didn’t talk extensively about the need for energy efficiency, that was clearly Simmons’ implied message. We need to create solutions, he said, before the approaching energy crisis is terminal.

Matt Simmons and Amory Lovins (Rocky Mountain Institute) impress me as having complementary messages. Add Jim Hansen of NASA on climate change and you have a three-point case that makes massive investment in energy efficiency a no-brainer:

• Simmons: oil (and natural gas) production will lag behind demand and energy prices are certain to rise.
• Lovins: we can reduce energy consumption by half using current technologies, and without any loss in quality of life.
• Hansen: climate change due to global warming is happening, and world-wide action is needed to avoid calamitous consequences.

The final question posed to Simmons by the moderator was: “Does it make sense for an urban region like Kansas City to have an energy strategy as part of its economic development plan?”

Simmons’ response: “Absolutely.”

The Kansas City region appears to have a default energy strategy: that we should just trust the energy companies and utilities. But given that they make their money selling energy, and that they can pass fuel price increases along to their customers with little difficulty, it seems to me that we’d be better served having a deliberate energy policy, formulated in consultation with a wide range of interests and perspectives.

The Chamber demonstrated foresight and leadership by bringing Matt Simmons to Kansas City, and they have subsequently announced they will form an energy policy task force headed by KCP&L CEO Bill Downey.

Will the Chamber task force be inclusionary? Will it see the wisdom of energy efficiency? Or will they lean toward the supply side and conclude, “Not to worry ‘cause we’ve got coal.”

Time will tell.