A geophysicist friend, remarked after a visit to one of the local casinos, "Casino gambling just isn't exciting after 40 years in the oil business."
I'm guessing some journalists are just now figuring this out.
I proposed to him a bet using what Julian considered the best measure of a resource's value: how it compares with the average worker's wage. I offered to bet that the price of oil would not rise faster than the average wage, meaning that future workers would be able to afford oil more easily than they could today.
Mr. Simmons said he favored a simpler wager, based on his expectation that the price of oil, now about $65 per barrel, would more than triple during the next five years. He said he'd bet that the price in 2010, when adjusted for inflation so it's stated in 2005 dollars, would be at least $200 per barrel.
Maybe bankers are as jaded as oil men when it comes to ordinary gambling. Kevin Drum points out that for Simmons to take Tierney's money in the original proposition, oil would only have to hit about $85 per barrel. He wants to take Tierney up on the original bet.
Enter Megan McArdle, non-gambler.
While the long term trend may well be upwards, in the short term, there's going to be a lot of volatility. To bet that oil will be above $85 a barrel in five years, you have to bet that China won't go into recession, Americans won't change their driving/insulating habits, Iraq won't be able to boost its oil production past the tepid prewar levels driven down by years of mismanagement, Saudi Arabia will default on its promises to raise production by 2.5 million bpd--indeed, no OPEC producers will respond to higher prices by increasing their pumping capacity, and that about a zillion other things that could drive down the price of oil, won't.
(So will I back John Tierney? Not I! How would little ol' me know when the bull will end its run and the bear will start?)
Oh heck, give me a roll of quarters and let's hit the slots. If I double my money, I'll be able to buy an almost full tank of gas.
UPDATE: Make that almost a half tank a gas.
