The chairman of energy investment-banking firm Simmons and Company International has predicted that oil prices could double or more within a few years.
Matt Simmons said that in his view oil was “dirt cheap at $140 a barrel”, and with supplies having peaked and demand growing prices were bound to go higher.
He said: “It is not beyond the pale of imagination to see oil at $300, $400, $500 or even $600 a barrel within a relatively short time, much less than 20 years. It is not speculators who are driving oil prices. It’s simply about supply and demand.”
Mr Simmons, in Aberdeen to officially open his firm’s new offices in Waverley Place, also predicted that oil majors did not have a future in their present form because they were too big, were not replacing reserves quickly enough, and had too few projects in the pipeline.
He said: “National oil companies (NOCs) will take over from the majors, which will get busted up. The NOCs don’t want them and don’t need them, although they will always need international energy service companies like Aberdeen’s Wood Group, which will continue to thrive. After all it is the energy service sector which has invented the technology.”
Mr Simmons praised Wood Group for being bold in going international. He said too many Scottish companies had been too comfortable operating just in the UK sector of the North Sea.
He said he measured oil prices of $140 as being about 25 cents a cup, and consumers could not buy anything for less than $1 a cup.
“If you have a 2,000lb vehicle, fill it with six beefy people and all their luggage, you can travel two miles for 25 cents. I’ve done my maths and that’s cheap,” he added.
Mr Simmons, who founded his business in Houston in 1973 to focus on “providing the highest quality investment-banking advice to energy service firms globally”, said Simmons and Co International had expanded its interests to cover all energy, including wind, wave nuclear and solar power.
It opened its Aberdeen office in 1999 in Queens Road; its first outside America
Aberdeen, where more than 40 of Simmons’ staff of 160 are employed in Simmons House – formerly the Prince Regent Hotel – is now the HQ for its western hemisphere branches in London, Dubai and Oslo.
Mr Simmons said: “We simply outgrew Queens Road. But one benefit of moving was that Queens Road was the only office the company has ever bought, and when we sold it we made a tremendous gain.”
Simmons and Co has advised in transactions worth more than £60billion.