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waitingscot

Who Will Win The Simmons-tierney Bet?

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The more I read the more I am convinced the economic troubles are connected with looming the energy crisis, in particular surrounding the peak production of oil worldwide.

In relation to that development I read about a bet between the arch-pessimist on Peak Oil and its implications, Matthew Simmons, author of Twilight in the Desert that argues Saudi Arabia in particular has far less oil in reserves than is claimed. He bet with John Tierney in 2005 that oil would be over $200 a barrel in 2010.

John Tierney is an optimist when it comes to mankind's ability to overcome any predicted energy crisis and he bet that oil in 2010 would be under $200 a barrel.

http://en.wikipedia.org/wiki/The_Simmons-Tierney_Bet

Have you heard of the bet before? Got a view on who will win? Have we reached Peak Oil yet? Has international deflation spoiled Simmons prediction or will oil bounce back higher over the next year and a half?

Edited by waitingscot

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Volatility is going to continue but the oil price will certainly peak over $200 in 2010 before finding a rather "high" low. It's currently hovering at $70 at that is with a full blown global recession on going. Mexico is undergoing a rather dramatic downward shift in production so I would imagine the US's number 3 exporter will probably cease export's next year. Not sure what the US will do then, they have rather placed all their eggs in the Iraqi basket (unfortunately the situation there is a complete basket case). It will be top entertainment.

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This is actually a double bet, because it involves oil and currencies.

I think it's quite reasonable that the oil price will spike above $200 during 2010 at some point, although that may say more about the USD than oil itself.

However, I can't see any lasting sign of economic recovery and consequently any sign of oil prices much higher than last year.

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This is actually a double bet, because it involves oil and currencies.

I think it's quite reasonable that the oil price will spike above $200 during 2010 at some point, although that may say more about the USD than oil itself.

+1

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Could we rephrase the question ?

How many barrels of oil will 1 oz of gold buy, on average, in 2010.

1. barrels < 12

2. 12.1 < barrels < 14

3. barrels > 14.1

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Good point about currencies.

I had a big flutter on oil prices a couple of months ago, putting £30K of my savings into Brent Oil. Prices have increased, but to win big, I need the pound to stay low. If it rises against the dollar, much of my gains are eliminated. I'm winning at the moment, but could have done much better if the pound had stayed at its then low level.

As for the future, I'm predicting oil prices will rise significantly over the next year, but I have no inside knowledge apart from talking to a friend who works in the industry as a geologist. He hates all the speculation but conceded that he was certain oil was at or near peak, and fully expected the price to rise heavily.

As always, the question for an investor is when to leave the market. Recent history has seen extraordinary fluctuations, and I've no idea if $100 or $150 or £200 would be the deal time to cash in the chips -- assuming that they do reach these levels at some point. As stated, from an investment perspective, you have to combine the oil price with the value of the pound. Conceivably you might be better off cashing in at $150 than $200 if the pound is struggling.

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It might spike above $200, but it won't average above that figure due to the demand destruction/sawtooth effect.

I agree. If it's that expensive, people won't buy it or use it, demand must fall. Prices back up...

The middle point of this yo-yo seems like $70 at the moment, and some of that must be sentiment which I am dubious about. Can't see it shifting as much as up to $200

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A poll concerning the looming energy crisis following Peak Oil

The more I read the more I am convinced the economic troubles are connected with looming the energy crisis, in particular surrounding the peak production of oil worldwide.

[....]

John Tierney is an optimist when it comes to mankind's ability to overcome any predicted energy crisis and he bet that oil in 2010 would be under $200 a barrel.

Your description and write-up conflates 'energy' with 'oil'. While oil may one day be in short supply, energy will not -- renewable sources are abundant and inexhaustible. One does not need to be an "optimist" to predict that rising oil prices will accelerate the move to other forms of energy.

sunpotential.jpg

To answer your questions: yes; yes; probably not; no and don't know.

Unless the dollar collapses dramatically I would not expect oil to even reach $200 in 2010 nevermind average that price over the year.

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The more I read the more I am convinced the economic troubles are connected with looming the energy crisis, in particular surrounding the peak production of oil worldwide.

In relation to that development I read about a bet between the arch-pessimist on Peak Oil and its implications, Matthew Simmons, author of Twilight in the Desert that argues Saudi Arabia in particular has far less oil in reserves than is claimed. He bet with John Tierney in 2005 that oil would be over $200 a barrel in 2010.

John Tierney is an optimist when it comes to mankind's ability to overcome any predicted energy crisis and he bet that oil in 2010 would be under $200 a barrel.

http://en.wikipedia.org/wiki/The_Simmons-Tierney_Bet

Have you heard of the bet before? Got a view on who will win? Have we reached Peak Oil yet? Has international deflation spoiled Simmons prediction or will oil bounce back higher over the next year and a half?

I voted for Tierney, but only because I think Matt Simmons didn't take into account the possibility and effects of recession caused by high prices. It'll happen 2011/2012 for sure.

Oil production has been on a plateau since around 2005 so basically I think we have hit Peak Oil.

Edited by 1929crash

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Guest Steve Cook
I agree. If it's that expensive, people won't buy it or use it, demand must fall. Prices back up...

The middle point of this yo-yo seems like $70 at the moment, and some of that must be sentiment which I am dubious about. Can't see it shifting as much as up to $200

Demand for oil at $200 per barrel will indeed cause demand destruction in all but the essential product/service derivatives of oil............to begin with

However, as time marches on, the essentials is all that will be left. At which point, the price cannot fall any further as demand cannot fall below that essential level.

Of course, in the very long run, demand destruction will still have it's way in the form of large scale blackouts and, ultimately, mass starvation. The most fundamental demand destruction of all.

We are hopefully a decade or two off that point. At least as far as the West is concerned.

Hopefully....

Edited by Steve Cook

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I voted Tierney.

For oil to average over $200 I think one of two things need to happen:

Massive demand - Eg huge recovery taking us back to or exceeding peak boom levels of activity (Never, ever seen a recovery like that in history, it would need average economic growth of 10-20% in 2010 despite of the high oil cost...)

Massive dollar collapse against oil producing currencies - Any dollar collapse on that scale would bring down the whole world's economy, the decoupling theory is long dead and the G20 would act all out to prevent it.

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I agree. If it's that expensive, people won't buy it or use it, demand must fall. Prices back up...

The middle point of this yo-yo seems like $70 at the moment, and some of that must be sentiment which I am dubious about. Can't see it shifting as much as up to $200

What will they use as a replacement?

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What will they use as a replacement?

For oil.. at the margins, people can dump cars for public transport and stop non essential driving instantly; we've seen from previous crises that there is some slack in the system.

Ongoing, you can save perhaps 25% of oil usage just from a more efficient car fleet. Electric cars are finally looking like you can buy them; the railways can be electrified.

The tricky problems are:

- Long distance personal transport (>50 miles). Assuming that you don't like trains, which is fair enough. Can be dealt with in several ways.

- Road goods transportation. Forget EVs for this; we need a form of synthetic fuel, or a much better rail network with electric trucks for in-City use only.

- Air travel. That WILL require a liquid fuel, unless someone manages to create a nuclear reactor small and light enough to fit in a passenger jet.. which may lead to NIMBY concerns..

Petrochemical feedstocks can be derived elsewhere. Peak oil is primarily a problem of transportation.

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For oil.. at the margins, people can dump cars for public transport and stop non essential driving instantly; we've seen from previous crises that there is some slack in the system.

Ongoing, you can save perhaps 25% of oil usage just from a more efficient car fleet. Electric cars are finally looking like you can buy them; the railways can be electrified.

The tricky problems are:

- Long distance personal transport (>50 miles). Assuming that you don't like trains, which is fair enough. Can be dealt with in several ways.

- Road goods transportation. Forget EVs for this; we need a form of synthetic fuel, or a much better rail network with electric trucks for in-City use only.

- Air travel. That WILL require a liquid fuel, unless someone manages to create a nuclear reactor small and light enough to fit in a passenger jet.. which may lead to NIMBY concerns..

Petrochemical feedstocks can be derived elsewhere. Peak oil is primarily a problem of transportation.

Peak oil is primarily a problem of food. Fertilizers are oil and gas based. With peak oil we'll start using natural gas for transport (CNG) for larger vehicles. For cars it is possible but will require re-gearing the petrol stations to handle large volumes and probably require more of them.

Oil enables mankind to do the work of 10-20 men with a single machine (be it in a factory or on a farm). Once we lose cheap oil (we won't lose oil entirely) then there'll be no more unemployment as more people will have to go back to labour intensive jobs.

Look at the census records from the 1800's - huge numbers of men had the job "agricultural labourer". how many do today? What goes around comes around.

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What will they use as a replacement?

I mean recession will mean less demand in general, fewer factories, less driving about, less flying etc.

So in teh short term teh answer i sthat they simply won;t use it.

longer term we will have to work out a way of making solar energy work or similar.

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Peak oil is primarily a problem of food. Fertilizers are oil and gas based.

Actually, Gas based. You can run the Haber process quite happily on electricity alone (using electrolysed hydrogen) is you really want.

Besides, the actual *amount* of oil and gas used in agriculture is perhaps 10% absolute maximum of the total produced. If it were near 100% then this point would be valid.

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