Sometimes discussions on both sides of the issue of PO (peak oil) look more like a PR (public relations) campaign than an open exchange of ideas.
A recent report from
Cambridge Energy Research Associates claimed that
the world will have plenty of capacity to increase oil production an additional 16 million barrels a day over the next five years. This report was extremely influential, cited by a number of observers as assurance that peak oil cannot be just around the corner. However, as the Oil Drum noted, very few of those claiming to have been persuaded by the report are likely to have carefully examined it, since CERA charges $2,500 to obtain a copy of the actual report. What people have seen instead are summaries by CERA Chairman Daniel Yergin of what’s in the report– basically press releases. I am concerned that I have yet to see anyone respond to the challenge raised by the Oil Drum, repeated here and extended there, to explicate and defend CERA’s assumptions about depletion rates for existing fields.
And then from this week’s New York Times comes the story that columnist John Tierney has engaged Matthew Simmons, peakest among peak oilers, in a wager of $5,000, which Simmons can only win if oil averages over $200 a barrel, adjusted for inflation, in the year 2010. Multiple pundits commended Simmons for “putting his money where his mouth is.”
Except that he isn’t. For starters, I wonder whether $5,000 is that significant a sum to Mr. Simmons. And, as I’ve noted many times, if one had faith in Simmons’ prediction, one could bet many, many millions of dollars, at terms far more favorable than Simmons received with this Tierney wager, using existing futures or options contracts. For example, Simmons could pay $5,800 today to buy a $70 December 2010 call option, which would net him $130,000 in 2010 if oil reaches a nominal price of $200 a barrel by 2010. Or, if he felt ever so slightly greedy, he could buy, say 100 of these, if he’s got $580,000, and earn himself $13 million in 2010. And you could, too, if you think Simmons is right.
No, Simmons isn’t putting his money where his mouth is. He’s putting his mouth where his mouth is, and very effectively, too, I might add. After all, I’m talking about it, and you’re reading about it, and that is what Simmons really wanted to accomplish. His goal isn’t to win a bet. His goal is to get people thinking and talking about the prospect of oil going above $200 a barrel in a few years.
Not that there’s anything wrong with trying to get people thinking about an issue that you feel they’re ignoring. But my one concern is that the hoopla over this bet makes it look as if Simmons is really ready to back up his claim, when the truth is that he’s not. The fact that there is so much money out there eager to take Tierney’s side of such a wager is in my mind one of the key issues that peak oil advocates need to explain.
And I suppose, given that I’m often extolling the virtues of capitalism, I’m not in a position to berate Yergin for figuring out how to make a few bucks on the side in the process of getting his version of the truth out. Even if I do wish somebody from CERA would address the depletion question.
No, I guess what really bugs me is that I haven’t figured out a way to charge people $2,500 each time they want a new installment of the wit and wisdom of Econbrowser.