Simmons-Tierney bet

The Simmons-Tierney bet is a bet made in August 2005 between Houston banking executive Matthew R. Simmons and "New York Times" columnist John Tierney. [ [http://www.nytimes.com/2005/08/23/opinion/23tierney.html?_r=1&oref=login The $10,000 Question] , The New York Times, By JOHN TIERNEY, Published: August 23, 2005] The stakes of the bet are US$10,000.00. The subject of the bet is the year-end average of the daily price-per-barrel of crude oil for the entire calendar year of 2010. The bet is to be settled on January 1, 2011.

Background

Simmons and Tierney had never met before. But their association began after Simmons had been interviewed by a journalist colleague of Tierney's, Peter Maass, for a "New York Times Magazine" article called "The Breaking Point," published on August 21, 2005. The article heavily emphasized the doomsay claims of Simmons latest book "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy". That book is his prophecy of imminent global catastrophe which he asserts will be triggered by the allegedly soon-coming "peaking" of Saudi oil output, and the supposed domino effect of destruction that he says will subsequently be wreaked upon the global economy. Tierney's dubious reaction to the article prompted him to call Simmons, introduce himself, and ask Simmons to back up his claims with cash. The friendly wager was immediately worked out over the phone.

Terms of the bet

Of the many claims that Simmons made in the "Times" article, his prediction of a tripling in the price-per-barrel of crude struck Tierney as perhaps the most incredible. In the Peter Maass article, Simmons was quoted as saying:

"We're going to look back at history and say $55 a barrel was cheap," [Simmons] said, recalling a TV interview in which he predicted that a barrel might hit triple digits. [Simmons] said that the anchor scoffed, in disbelief, "A hundred dollars?" Simmons replied, "I wasn't talking about low triple digits."

So Tierney focused upon that one detail and the two men fashioned the bet accordingly. Their final agreement was a commitment to tabulate every closing price-per-barrel of oil for each market day of 2010, then average out those prices for the entire year from January 1 through December 31, (adjusted for inflation to 2005 prices). If the year-end adjusted average comes out to $200.00 or more per barrel, Mr. Simmons wins. If it averages out to $199.99 or less, Mr. Tierney wins. The winner takes the entire pot of US$10,000.00, plus interest ($5,000.00 from both parties, currently sitting in escrow).

The bet was made public just two days later in an op-ed piece by Tierney published in the New York Times, August 23, 2005 called "The $10,000.00 Question".

Precedent and legacy of the Simon-Ehrlich wager

This bet is admitted by both parties to be a good-natured resurrection of the same spirit and tradition behind the famous Simon-Ehrlich wager which spanned the years 1980-1990.

Tierney was a life-long friend and protégé of the late Julian Simon (the winner of the Simon-Ehrlich wager), and eagerly embraced the opportunity to follow in his mentor's footsteps. Tierney is (as was Simon) an avowed Cornucopian, believing in the ingenuity of humankind to adapt and improvise. Meanwhile, Simmons' "Twilight in the Desert" seemed to Tierney to be cut from the same gloom-and-doom cloth as Paul R. Ehrlich's "The Population Bomb", a book published in 1968 which later became the impetus for the Simon-Ehrlich wager. When that well-renowned wager was settled in 1990, Simon's boomster victory over Ehrlich's doomster philosophies was heralded as a triumph for Cornucopian economics.

Tierney made unabashed reference to that infamous wager as he gave his apologetic for embarking upon this redux of it:

I didn't try to argue with [Simmons] 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.

The inclusion of Rita Simon

After the bet was agreed upon (but before it was made public) Tierney immediately called Rita Simon, the widow of Julian Simon. She delightedly joined with Tierney's effort to carry on with her late husband's legacy, and even financed one half of Tierney’s obligation to the bet by contributing USD$2,500.00 of her own. (So technically, this wager might more appropriately be called the Simmons-Tierney-Simon bet.)

Ongoing updates

Even though the year 2010 has not yet arrived, the price-per-barrel of crude oil is being heavily scrutinized by oil industry watchers aware of this bet. Many peak oil websites make frequent reference to the Simmons-Tierney bet [ [http://www.theoildrum.com/node/3738 Update on the Simmons-Tierney Bet] , theoildrum.com, by Stuart Staniford on March 17, 2008] and some have already begun daily tabulations and adjusted-for-inflation charts on the latest price-per-barrel. (The price-per-barrel of oil at the time of the bet — August 2005 — was around $65.00. The price as of the initial publishing of this article — May 10, 2008 — was $125.96; the record high of $147 in July 2008 was in large part attributable to a weak U.S. dollar.)

Both Simmons and Tierney (as of this writing) have publicly availed their e-mail addresses with a formal and open invitation to anyone else in the general population who might like to make similar wagers.

ee also

*Price of petroleum

External links

*http://www.nytimes.com/2005/08/23/opinion/23tierney.html
*http://www.twilightinthedesert.com/
*http://www.theoildrum.com/ - The Oil Drum

References