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The Future of Petroleum

Monday, September 26, 2005
Longworth House Office Building

Growing domestic and global demand for petroleum combined with our continued and expanding reliance on foreign supplies, increased concentration of production in the Persian Gulf region, disruption to domestic production by catastrophic events like this year's hurricanes, and the fact that more than one-fourth of this country's total trade deficit is attributable to oil imports all pose significant risks and uncertainties that Americans must address.

With this situation in mind, Resources for the Future, GLOBE USA (Global Legislators Organization for a Balanced Environment USA), and the Henry M. Jackson Foundation will convene a briefing, bringing together legislators, scholars, and representatives from the corporate and private sectors to discuss moving forward on this critical topic.

Video of the briefing and commentary follows below.

Video of the Briefing
(To view the videos, you need RealPlayer. Get a free RealPlayer at www.real.com.)

Steven W. Percy - Introduction
Former Chairman and CEO, BP America, Inc. Director, Resources for the Future

Link to VideoLink to Video

Steve Percy was Chairman and CEO of BP America, Inc., from 1996 to 1999. Prior to assuming those duties, he was President of BP Oil in the U.S. from 1992 to 1996. Mr. Percy returned to BP America in 1992 from London, England, where he served as Group Treasurer of The British Petroleum Company p.l.c. and Chief Executive of BP Finance International.

Since retiring from BP, he has served as the head of Phillips Petroleum’s Refining, Marketing and Transportation Company, visited as a Professor of Corporate Strategy and International Business at the University of Michigan Graduate School of Business, and conducted workshops on corporate governance for the AHC Group, a strategic consultant in the areas of environment, energy, and materials. He contributes to the Millennium Ecosystem Assessment as Coordinating Lead Author with respect to its Conceptual Framework and its Responses working group and leads the writing of its synthesis report for business and industry. Previously, he served as a member of President Clinton’s Council on Sustainable Development as Co-Chair of its Climate Change Task Force.

Born in 1946, Mr. Percy is a native of Cleveland, Ohio. He earned a Bachelor of Science in mechanical engineering from Rensselaer Polytechnic Institute, a Master’s in business administration from The University of Michigan, and a Juris Doctorate from Cleveland Marshall College of Law. He is a member of the Ohio State Bar.

Matthew R. Simmons
Chairman, Simmons & Company, International Director, Resources for the Future

Matthew Simmons is Chairman and former CEO of Simmons & Company International, a specialized energy investment banking firm. The firm has completed over 500 investment-banking projects for its worldwide energy clients at a combined dollar value of approximately $60 billion. 

Link to Video
Link to Video
Presentation Slides 
(Printer-friendly PDF format) Link to Presentation Slides

Simmons began a small venture capital, private debt placement, merger, and acquisition firm in Boston. Among his early clients was a rapidly growing subsea service company. By 1973, most of his clients were oil service companies. Following the 1973 Oil Shock, Simmons created a Houston-based firm to concentrate on providing highest quality investment banking advice to the worldwide oil service industry. Over time, the specialization expanded into investment banking covering all aspects of the global energy industry.

Today the firm has approximately 150 employees and is one of the largest energy investment banking groups in the world, with offices in Houston, Texas; London, England; Boston, Massachusetts; and Aberdeen, Scotland. Simmons publishes numerous energy papers for industry journals and is a frequent speaker at government forums, energy symposiums, and in boardrooms of many leading energy companies around the world.

Steven W. Percy 
Response to Matthew Simmons

 

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Link to Video

Question and Answer Session

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Link to Video

 

Representative Roscoe Bartlett (R-MD)
Congressional Host

 

Now serving his seventh term in the House of Representatives, Roscoe G. Bartlett has also had successful careers as a professor, research scientist and inventor, small business owner, and farmer. One of three scientists in Congress, Bartlett serves a senior member of the Science Committee, among others.

Bartlett’s long professional career includes inventing a series of breakthrough respiratory support equipment while working at the U.S. Navy's School of Aviation Medicine. He holds the basic patents for rebreathing equipment that recycles the oxygen from exhaled air in closed systems, extending oxygen supplies and making them portable – two critical components of the equipment that supplies oxygen to astronauts, pilots, and fire/rescue personnel. He worked at the Johns Hopkins Applied Physics Laboratory, directing a research group in Space Life Sciences to design research experiments that contributed to the Gemini, Mercury, and Apollo missions. He has also worked at IBM on biomedical engineering and defense-related projects.

Bartlett attended Columbia Union College where he majored in theology and biology, and he earned his Master’s degree in physiology from the University of Maryland. He was then hired as a U-MD faculty member and taught anatomy, physiology and zoology while simultaneously earning a Ph.D. in physiology.

Representative Vernon Ehlers (R-MI)
Congressional Host

 

U.S. Representative Vernon J. Ehlers of Grand Rapids was sworn in on January 4, 2005, to serve his sixth full term in the House of Representatives. Ehlers joined Congress following a distinguished tenure of service in teaching, scientific research, and public service, and is the first research physicist to serve in Congress.

Representative Ehlers serves on four committees, including the Science Committee, where he serves as Chairman of the Subcommittee on Environment, Technology and Standards. During his tenure on the Science Committee, he has rewritten the nation's science policy and introduced the National Science Education Acts aimed at reforming K-12 science, mathematics, engineering, and technology education. He also serves on the Transportation and Infrastructure Committee, where, in the 107th Congress, he led the development of the Great Lakes Legacy Act, which authorizes spending $270 million over the next five years to clean up sediments in the Great Lakes.

Ehlers holds an undergraduate degree in physics from Calvin College and received his Ph.D. in nuclear physics from the University of California, Berkeley. In 1966, after six years of teaching and research at Berkeley, he moved to Calvin College, where he taught physics for 16 years and later served as chairman of the Physics Department.

 

Briefing Summary

"Our Wake-Up Call Is Here"
Recent disasters highlight unsustainable path for petroleum in the United States

With the nation counting the human and environmental tolls from the double wallops of hurricanes Katrina and Rita, substantial attention also turns to the effect of these natural disasters on energy in the U.S. As Steven Percy, former CEO of BP America, notes, "We have seen a gathering storm around the issue of whether or not we have adequate petroleum to carry our economy and society into the future."

Link to Handout
Handout:
Facts on U.S. Petroleum Consumption and Production



In the context of this situation, Resources for the Future (RFF) and GLOBE USA convened "Energy 2050: The Future of Petroleum," the fifth in a series of briefings funded by the Henry M. Jackson Foundation on the state of energy in the U.S. The briefing, moderated by Percy, featured Matthew Simmons, chairman of Simmons & Company, International, and was hosted by Representative Roscoe Bartlett (R-MD) and Representative Vernon Ehlers (R-MI).

Looking at the current situation, Simmons declared, "Our energy wake-up call is here." He noted, "The full impact of Katrina is just barely starting to emerge," calling the storm "our energy 9/11." He pointed out that petroleum supplies in the U.S. were already threatened by increased domestic and international demand and turmoil in the Persian Gulf, while rigs, refineries, and processing were all effectively operating at 100 percent. The storm, and the one that followed it weeks later, left at least 18 oil rigs adrift in the Gulf of Mexico and crippled refining capacity for an unknown period of time.

Yet industry response to the situation underestimates how long-term the impacts will be. "The timeframe to rebuild is very hazy," Simmons said. "I think the industry right now unfortunately is lulling itself into 'this is going to be a few weeks,' when we should probably realistically be saying we were out of spare parts before Katrina, and rebuilding some of this stuff might take a long, long period of time."

Simmons cited 20 years of "poor data," along with bad analysis, wrong signals sent by low gas prices, and "strong opinions overruling fundamental facts" on policymaking as causing the current dilemma. He stated that "the single most important thing we can do now is energy data reform," but that Americans need to consider a drastic change in how transportation is used. The public, too, seems ill prepared to respond to a crisis in the petroleum industry. Despite the fact that demand for oil was supposed to peak 10 years ago, he said, today fully 70 percent of U.S. oil consumption goes to transportation, and consumer demand continues to grow.

Simmons feels many current suggestions for fixing the oil problem will not adequately address the situation. Hybrids alone will not be sufficient, he said, because turning over the auto fleet won't happen fast enough to make a big dent, "and we need a big dent." Percy noted that studies have shown if a consumer can afford to drive farther, they will, which might result in an unchanged demand for gasoline. Simmons believes increased taxes on gas will not curb the appetite for oil, either, stating that people will then blame higher prices on the taxes, rather than consider changing behavior.

"We've gotten so utterly spoiled by low prices that we have no idea what prices should be," he said, suggesting instead that we return to shipping goods by vessel instead of truck, stop making long commutes, and eat locally instead of consuming produce from around the globe.

Beyond these measures, however, Simmons calls for "a research and development explosion, the likes of which we have never seen, to invent some new forms of energy that don't exist today. We should have energy laboratories springing up all over America - we haven't tried for 100 years to invent a new energy source."

Percy echoed the call for increased research. "(It) offers a great opportunity for entrepreneurs and innovators who can come up with energy solutions," he said. He also noted that the problem extends beyond U.S. borders, with much of the increased demand coming from places like India and China, so any solutions must have a global focus. "We can flatten our demand, we can even have our demand go down, and we're still going to see growth there unless something is done in those places."

Simmons concluded by stressing the need for immediate action. "Ingenuity is the byproduct of panic," he said, "and we now have a good reason to panic. We should have started (Plan B) a decade ago, but I'd say today is a lot better than tomorrow."

 

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