New York Times columnist John Tierney describes how he won a bet on the price of oil against a peak oil doomsayer. He followed in the footsteps of the "Cornucopian" economist Julian Simon, who famously won a bet that a basket of metals would be cheaper in 1990 than it was in 1980. The losers of that bet were the famous Mathlusian Paul Ehrlich and John Holdren, President Obama's science czar. Tierney won his $5000 bet against Matthew Simmons, an energy investment banker, by relying on economic optimism and the price mechanism:
It's true that the real price of oil is slightly higher now than it was in 2005, and it's always possible that oil prices will spike again in the future. But the overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Wald and Cliff Krauss have recently reported. Giant new oil fields have been discovered off the coasts of Africa and Brazil. The new oil sands projects in Canada now supply more oil to the United States than Saudi Arabia does. Oil production in the United States increased last year, and the Department of Energy projects further increases over the next two decades.
The really good news is the discovery of vast quantities of natural gas. It's now selling for less than half of what it was five years ago. There's so much available that the Energy Department is predicting low prices for gas and electricity for the next quarter-century. Lobbyists for wind farms, once again, have been telling Washington that the "sustainable energy" industry can't sustain itself without further subsidies.
As gas replaces dirtier fossil fuels, the rise in greenhouse gas emissions will be tempered, according to the Department of Energy. It projects that no new coal power plants will be built, and that the level of carbon dioxide emissions in the United States will remain below the rate of 2005 for the next 15 years even if no new restrictions are imposed.
Maybe something unexpected will change these happy trends, but for now I'd say that Julian Simon's advice remains as good as ever. You can always make news with doomsday predictions, but you can usually make money betting against them.
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