Rod Dreher

Rod Dreher


Tierney to win peak oil bet

posted by Rod Dreher

In 2005, NYT columnist John Tierney bet a large sum of money with Houston oil guru Matt Simmons, on the future of peak oil. Tierney, a peak oil doubter, bet that the average price of a barrel of oil for the year 2010 wouldn’t be $200 or more; Simmons, a peak oil believer, bet that it would be that or greater.
Barring some massive disaster, Tierney’s going to win that bet. Why? Does that mean there’s no such thing as peak oil?
I’d say that’s the wrong conclusion to draw. The world was at or very close to full capacity on its use of available oil … right up to the global economic crash. The slowdown in economic activity caused a dramatic easing of oil demand. Simmons didn’t foresee the kind of economic falloff that the world experienced in 2007 and 2008, and from which we haven’t yet recovered. That doesn’t prove that peak oil is real, of course, but it does offer an explanation for why the price of oil is still dramatically lower than Simmons predicted. If the world’s economy returns to normal, then you’ll see the price of oil go up, because demand will increase to where it was pre-crash, but to my knowledge, supplies have not increased.
(Thanks to reader Peter K. for the link).



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Geoff G.

posted July 9, 2010 at 1:29 am


If the world’s economy returns to normal, then you’ll see the price of oil go up, because demand will increase to where it was pre-crash, but to my knowledge, supplies have not increased.
One way of forestalling peak oil and buying us time to develop and deploy alternatives would be to adjust our ideas about what constitutes a “normal” economy.
If I were inclined towards conspiracy theories, I might suppose that the current global economic situation was engineered for just this purpose.



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celticdragonchick

posted July 9, 2010 at 1:57 am


It was the wrong sort of bet to make.
You don’t try to project the price. You project production. John Tierny may win the bet, but he is an idiot who has no business or scientific background to tell geologists what they should know about their own field of expertise.



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celticdragonchick

posted July 9, 2010 at 2:07 am


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.
Utter rubbish to compare this book to peal oil. Oil production peaked in the United States in 1971 or so as predicted by geologist M. King Hubbert in 1956. His bell curve model for oil field production is the standard for predictions in geology and petroleum engineering.
http://en.wikipedia.org/wiki/Peak_oil
The more I read of Mr Tierny, the more I wonder that anybody lets this fool near a computer.



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Julie

posted July 9, 2010 at 5:16 am


Supply and demand was not the cause of the huge increase in the price of oil that peaked in July 2008 and the dramatic decrease in oil prices that started in July 2008. Oil speculators drove up the price of oil with credit default swaps. The price started to fall in July 2008 because Congress was putting pressure on the CFTC to review for oil speculation. In addition, several industry experts were researching the issue. The reports issued around August and September 2008 found that supply and demand were not the cause for increased prices.
The global economic crash further limited the oil speculators because a large number were coming from the big investment banks that received bailouts.



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Christopher

posted July 9, 2010 at 6:19 am


I have a peak oil nutter in my family, who speaks of this topic to the exclusion of anything else. He makes family gatherings painful. So I have been following this topic involuntarily for years. The actual issue is flow rates and production. The declines in oil production predicted by Simmons have yet to materialize. He predicted Mexico would cease to export oil by now. Uber peak oil hysteric Matt Savinar predicted the end of civilization was imminent due to unsustainable oil prices of 400 a barrel and up!! Peak oil nutters wild impossible fantasies have yet to materialize. Apocalypse is a delusional fantasy.



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Jon

posted July 9, 2010 at 6:38 am


Peak oil is real, but it is not realistic to imagine it playing out in the course of a couple years. Rather it will play out over decades. $200 oil may happen– but not necessarily in our life times. And of course oil is not perfectly inelastic in respect to price: as the price goes up people can and do use less of it. That’s been the case in the US since before the recession.



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John E. - Agn Stoic

posted July 9, 2010 at 8:30 am


I am not an expert in the oil industry, but I’d be willing to speculate that at $200/barrel, to say nothing of $400/barrel, it would be economical to synthesize oil using coal as feedstock.



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Richard

posted July 9, 2010 at 8:31 am


celtic, Hubbert’s theory is the standard for peak oil theorists, but as you know there are lots of people who disagree with him and his ideas. There are also lots of models other than Hubbert’s for peak oil, so I’m not sure Tierney is an “idiot” in anyone’s eyes but your own.
As I’m sure you know, Hubbert also predicted peak oil in 1995 which didn’t happen; that does not mean he was wrong, just that we probably can’t predict peak oil at all.



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stefanie

posted July 9, 2010 at 10:55 am


Stagflation *is* the new normal.



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elizabeth

posted July 9, 2010 at 11:31 am


Which “peak oil” measurement are we talking about?
Peak oil per capita happened in 1979.



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celticdragonchick

posted July 9, 2010 at 2:21 pm


but as you know there are lots of people who disagree with him and his ideas.
Are they trained geologists?
If not, then I take their scepticism as seriously as I do with that of flat earthers and young earth creationists.
As I’m sure you know, Hubbert also predicted peak oil in 1995 which didn’t happen; that does not mean he was wrong, just that we probably can’t predict peak oil at all.
So the correct predictions he made were not really correct? We imagined it?
Fortunately, science tends to be self correcting, and when the observations don’t perfectly match the prediction, we can adjust the model.
M. King Hubbert initially predicted in 1974 that peak oil would occur in 1995 “if current trends continue.”[104] However, in the late 1970s and early 1980s, global oil consumption actually dropped (due to the shift to energy-efficient cars,[105] the shift to electricity and natural gas for heating,[106] and other factors), then rebounded to a lower level of growth in the mid 1980s. Thus oil production did not peak in 1995, and has climbed to more than double the rate initially projected. This underscores the fact that the only reliable way to identify the timing of peak oil will be in retrospect. However, predictions have been refined through the years as up-to-date information becomes more readily available, such as new reserve growth data



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stari_momak

posted July 9, 2010 at 3:37 pm


No obvious racial angle to ‘Peak Oil’ — if I think of something, I’ll get back to you all.



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MH

posted July 9, 2010 at 10:07 pm


stari_momak, crude oil is black, so I’m sure you can come up with something.



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stari_momak

posted July 9, 2010 at 10:59 pm


By Jove you;re right, MH.
Indeed they used to call crude Black Gold, as well as Texas Tea. But the former, I think that would be LeBron James these days.



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