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Category — Club of Rome

Matthew Simmons’s ‘Club of Rome’ Epiphany (The strange case of an energy investment banker turned energy alarmist)

[Editor note: This (unpublished) review of “Revisiting The Limits to Growth: Could the Club of Rome Have Been Correct After All?” by Matthew R. Simmons (1943–2010) was written by Bradley in 2000.

Tomorrow, Michael Lynch will examine the Simmons's peak-oil advocacy. A third post will described the failed bets that Simmons made with John Tierney of the New York Times and with Bradley on the average price of oil in 2010. (Simmons bet on $200 per barrel or higher averaged over 2010--and lost resoundingly.)]

Matt Simmons founded the investment banking firm Simmons & Company International soon after the 1973 energy crisis to cater to oil companies. He first stepped out in a very public way by questioning official inventory statistics for oil. But then he took a decidedly controversial turn (and one that befuddled his longtime industry friends). In this White Paper, Simmons donned a neo-Malthusian hat to challenge the reality of the improving condition of mankind (particularly in market settings). 

But given the elementary errors and oddities of his attempted resurrection of the doomsday Club of Rome study, one must speculate if Simmons wanted to be a maverick for its own sake and whether he was working from his conclusions to his reasoning rather than the other way around. Such a perversion of logic appears to have also occurred in his peak-oil thinking–suggesting a strange case study of energy thinking indeed.

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Simmons’s  “Revisiting The Limits to Growth: Could the Club of Rome Have Been Correct After All?” attempts to resurrect the major themes of the Club of Rome’s much maligned 1972 study, The Limits to Growth. This study used an MIT “formal, written model of the world” to assess five concerns 100 years out: “accelerating industrialization, rapid population growth, widespread malnutrition, depletion of nonrenewable resources, and a deteriorating environment.” Simmons thus concludes:

If the present growth trends in world population, industrialization, pollution, food production, and resource depletion continue unchanged, the limits to growth on this planet will be reached sometime in the next one hundred years. The probable result will be a rather sudden and uncontrollable decline in both population and industrial capacity.

Mid-course corrections, however, Simmons’ finds, could permit “a condition of ecological and economic stability that is sustainable far into the future.” This hint of optimism is joined at the end of the book with the statement, “It may be within our reach to provide reasonably large population with a good material life plus opportunities for limitless individual and social development.” Other than this sop to reality, much alarmism reigns.

Simmons defends Limits to Growth against the “premature” criticisms of economists. He cites the currently tight energy market as part of a possible if not probable era of increasing resource constraints. He chides a one-year-old Foreign Affairs article that predicted two decades of an oil glut and proudly refers to his own 1994 forecast that all three energy “bubbles” with oil, gas, and drilling rigs was about to burst. He notes that a major concern of Limits to Growth, income inequality, is still with us.

Simmons is correct to disparage those who believed that low energy prices would continue almost indefinitely. That includes a lot of the market investors and academics who assumed that technology would keep supply ahead of demand even in a low price environment. Simmons qua contrarian is to be commended, particularly if he profitably bet on his views with his investments.

But Simmons as a sustainable development theorist is open to criticism on several grounds. One, he may have fallen into his own trap by getting “stuck” on the top end of the energy price cycle (short of making a case that anti-production public policies were now overtaking the inducement effects of high prices).

Second, Simmons extrapolates from the part to the whole by asserting without proof that all or most resources now face new constraints. He does not appear to have expertise in non-energy areas and does not cite a body of research supporting resource optimism beyond short-term price cycles. His ultimate trump card is pollution, which includes the key and possibly last sustainable development issue, increasing carbon dioxide concentrations in the atmosphere from hydrocarbon energy combustion.

Fundamental Misreadings, Contradictions

Simmons misread The Limits to Growth in fundamental respects as documented by these quotations (Simmons in bold). [Read more →]

February 9, 2011   1 Comment