As oil threatened to break through $150 a barrel a few weeks ago, many people worried that oil would keep going and soon hit $200.

Back then, Matthew Simmons was at the forefront in predicting spiraling oil prices with no end in sight.

According to financialsense.com, Mr. Simmons “has been an investment banker for 40 years. He is the founder and chairman of the world’s largest investment banking company, Simmons & Co. International. In 2005, he published ‘Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,’ a book that has galvanized the peak oil debate.”

In a July, 2008 appearance on CNBC’s Fast Money, Simmons predicted that at some point in our future, we could see gas shortages which would lead to “runs on banks.” He said that ultimately we could run out of usable diesel and gasoline, then within a week we would have food supply problems.

How did Simmons arrive at such a dire scenario? Simmons believes that world oil production likely peaked in May, 2005 while oil demand hasn’t. This is obviously a formula for some serious problems. But is he right?

Oil is now officially in correction territory. If you watch this Youtube video, Simmons seems to poo-poo the notion that high oil prices could be a bubble; yet now it seems that a bubble is indeed bursting. Does this mean peak oil theory is full of holes, or that Simmons is simply wrong short-term?

If Simmons is wrong and oil prices fall and stay down for awhile, my fear is that the American public and politicians will lose sight of our need for alternative energy and once again, nothing will be done even though everyone knows the dangers of dependence on foreign oil.

And who would argue that burning fossil fuels until they run out is a good idea?

Speaking of “fossil fuels,” I’m considering a future post on abiotic oil theory. This is the theory that oil is produced through natural processes in the earth, and is not the by-product of long dead organic material. (Yeah, sounds far out to me, but I’d like to take a look at it.)

Additional Resources:

Wikipedia.org (Peak Oil)

Wikipedia.org (Hubbert Peak Theory)

lifeaftertheoilcrash.net (Website that promotes peak oil theory and predicts horrible consequences)