Energy Today and Energy Investments
Matthew Simmons
President
Simmons and Company

Surviving in the energy industry has been as difficult as investing in it, according to Matt Simmons, Wednesday's keynote speaker.

Energy as an investment option received tremendous attention in the decade of the 1970s, which created superior energy returns. By 1980, according to Simmons, the average institutional investor had 30% of its money in energy. Since then, however, energy holdings have dwindled, down to 6.2% by the end of 2001. The decline, he said, is attributable to occasional bursts of volatility that also have created great gains and losses.

Last year, Simmons noted, an energy crisis seemed in full bloom. Oil prices were up and blackouts in California were widely predicted. The crisis, he said, was not resolved; it failed to materialize. That is because oil and gas prices weakened at the same time we experienced generally benign winter weather. A weak economy added further to demand relief.

Because there were few genuine supply fixes, many of the “solutions” were temporary events, Simmons suggests. Perceptions about these problems have heavily influenced the financial markets. Too often, Simmons said, energy perceptions have been wrong, leading to exceptional energy volatility.

Simmons believes long-term energy demand is a function of demographics more than the gross domestic product. He suggested that demographics favor rapid demand growth, which can occur only with substantial efforts and investments.

“Solving the world’s complex energy problems will be difficult,” Simmons said, “but the importance of energy to the economy indicates that the money must and will be spent.”

Simmons is the president of one of the largest energy investment banking groups, which he founded in 1974. He received his undergraduate degree from the University of Utah and an MBA from the Harvard Business School.