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The $10,000 Question - Will Oil Prices Triple in Five Years?
Posted on Wednesday, August 24, 2005 @ 19:53:32 GMT by vlad

Investors Overtone writes: The New York Times/ August 23, 2005
The $10,000 Question By JOHN TIERNEY

I don't share Matthew Simmons's angst, but I admire his style. He is that rare doomsayer who puts his money where his doom is.

After reading his prediction, quoted Sunday in the cover story of The New York Times Magazine, that oil prices will soar into the triple digits, I called to ask if he'd back his prophecy with cash. Without a second's hesitation, he agreed to bet me $5,000.

His only concern seemed to be that he was fleecing me. Mr. Simmons, the head of a Houston investment bank specializing in the energy industry, patiently explained to me why Saudi Arabia's oil production would falter much sooner than expected. That's the thesis of his new book, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy."

I didn't try to argue with him about Saudi Arabia, because I know next to nothing about oil production there or anywhere else. I'm just following the advice of a mentor and friend, the economist Julian Simon: if you find anyone willing to bet that natural resource prices are going up, take him for all you can.

Julian took up gambling during the last end-of-oil crisis, in 1980, when experts were predicting a new age of scarcity as the planet's resources were depleted by the growing population. Julian had debunked these fears in "The Ultimate Resource," the bible of Cornucopian economics, which showed how human ingenuity had kept driving down the price of energy and other natural resources for centuries.

He offered to bet the pessimists that oil or any other resource they chose would be cheaper, in real terms, at any date they picked in the future. The ecologist Paul Ehrlich, author of "The Population Bomb" and "The End of Affluence," took up his offer and chose copper, tin and three other metals worth $1,000 in 1980.

When the famous bet was settled 10 years later, the value of the metals had declined by more than half. As usual, people had found new ways to get the metals as well as cheaper substitutes, like the fiber optic cables that replaced copper telephone wires.

After collecting his winnings, Julian expanded his challenge, offering to bet anyone on any other resource price or measure of human welfare. Julian, who died in 1998, never managed to persuade Mr. Ehrlich or other prominent doomsayers to take his bets again. But now we have a braver prophet in Mr. Simmons.

I proposed to him a bet using what Julian considered the best measure of a resource's value: how it compares with the average worker's wage. I offered to bet that the price of oil would not rise faster than the average wage, meaning that future workers would be able to afford oil more easily than they could today.

Mr. Simmons said he favored a simpler wager, based on his expectation that the price of oil, now about $65 per barrel, would more than triple during the next five years. He said he'd bet that the price in 2010, when adjusted for inflation so it's stated in 2005 dollars, would be at least $200 per barrel.

Remembering a tip from Julian, I suggested that we use the average price for the whole year of 2010 instead of the price on any particular date - that way, neither of us would be vulnerable to a sudden short-term swing as the market reacted to some unexpected news. Mr. Simmons agreed, and we sealed the deal by e-mail.

The first person I told was Julian's widow, Rita Simon, a public affairs professor at American University. She was delighted to see Julian's tradition carried on and thought the bet sounded so good she wanted a piece of the action herself.

With Mr. Simmons's approval, we arranged for Rita and me to split the wager, with each of us putting up $2,500 against Mr. Simmons's $5,000. (Note to accounting department: I'm aware that my expense account doesn't cover gambling. I'm using my own money.) All the money is being put into escrow in a joint account; the winning side will collect the $10,000 plus any accrued interest on Jan. 1, 2011.

I realize this isn't a sure thing, because the price of oil has risen before - it quintupled in the 1970's. But then it dropped, thanks to new discoveries and technologies, validating the Cornucopians' optimism.

So I figure the long-term odds are with me. And while I'm at it, I'll extend Julian's challenge and consider bets from anyone else convinced that our way of life is "unsustainable." If you think the price of oil or some other natural resource is going to soar, show me the money.

For Further Reading

"The Breaking Point" by Peter Maass. New York Times Magazine, August 21, 2005.

Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy by Matthew R. Simmons. Wiley, 448 pp., May 2005.

The Ultimate Resource 2 by Julian L. Simon. Princeton University Press, 778 pp., revised edition, July 1998.

"Betting on the Planet" by John Tierney. New York Times Magazine, December 2, 1990.

Interested in supporting a ZPE based alternative -- that may help reduce the price of oil? Contact: Magnetic Power Inc. mgoldes@msn.com



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"The $10,000 Question - Will Oil Prices Triple in Five Years?" | Login/Create an Account | 14 comments | Search Discussion
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Re: The $10,000 Question - Will Oil Prices Triple in Five Years? (Score: 1)
by Sigma on Wednesday, August 24, 2005 @ 22:43:54 GMT
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Well... I don't have the funds, but if I did I would definently fund your operation. Hopefully if some angels are surfing this site they will take a second to ponder the benefit to mankind this technology would give. I believe Mark and his company really have something, and if any Angels are listening you should fund this company!

Re: The $10,000 Question - Will Oil Prices Triple in Five Years? (Score: 1)
by sparks35 on Wednesday, August 24, 2005 @ 23:49:38 GMT
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Nobody in this article is named Mark.
Nobody in the article has any type of NEW ENERGY device to invest in.
Nobody in this article is in need of ANGEL investors.
It's just an article about a couple of self-proclaimed experts making a bet on Oil Prices.
The fact that it was printed up in a NY Times Magazine somehow qualifies it as NEWS on this website.


  • Reread it. by Sigma on Thursday, August 25, 2005 @ 00:23:07 GMT

Re: The $10,000 Question - Will Oil Prices Triple in Five Years? (Score: 1)
by Technophile on Thursday, August 25, 2005 @ 09:47:38 GMT
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SWEET bet. Taking candy from a baby.

There are multiple energy technologies fully developed right now that are competitive with current oil prices (Sterling Solar http://www.stirlingenergy.com/whatisastirlingengine.htm , Thermal Depolymerization http://www.changingworldtech.com/ and http://www.fairchildinternational.com/ , and Ocean power http://www.oceanpowertechnologies.com/index.html , not to mention more conventional technologies such as coal gassification, oil sand and oil shale recovery and nuclear). The only drawback is that they require large capital investments, which could turn unprofitable if/when oil goes back under $20 or $30/barrel, which is why they aren't being implemented faster than they are.

And photovoltaics would kick into profitability well below $200/barrel oil.

So you will win this bet easily even without any new energy technology. And yet, there are multiple energy technologies on the brink of success that would cut energy costs by orders of magnitude.

The real bet would be more along the lines of betting whether or not oil will be below $10/ barrel by 2020. No, I'm not willing to bet money on it, but I'd say the odds favor it.

Re: The $10,000 Question - Will Oil Prices Triple in Five Years? (Score: 1)
by Cold_Steel on Thursday, August 25, 2005 @ 18:26:01 GMT
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I've been telling people I'd be willing to bet $1,000 that by some time in the year 2010, cold fusion (low energy nuclear reactions, chemically assisted nuclear reactions, whatever you call it) technology will be available in a commercial product, perhaps in the form of a water heater or something similar.

Re: The $10,000 Question - Will Oil Prices Triple in Five Years? (Score: 1)
by sparks35 on Friday, August 26, 2005 @ 01:41:39 GMT
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SO .....Overtone is Mark Goldes.

Goldes what is the problem?

Do you have what you say you have?
Do you want to be a HERO or a GOAT?
If you have what you say you have.....just release it. You will be a RICH and FAMOUS man!
Update your frigging website...Put in pictures...
explain how it works....GO PUBLIC you goof.
You don't need millions....JUST DO IT...
Don'r be a f...ing idiot. Jeez.



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