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The Simmons–Tierney bet was a wager made in August 2005 between Houston banking executive
Matthew R. Simmons and ''
New York Times
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid d ...
'' columnist
John Tierney. The stakes of the bet were US$10,000.00. The subject of the bet was the year-end average of the
daily price-per-barrel of
crude oil
Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crude ...
for the entire calendar year of 2010 adjusted for
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
, which Simmons predicted to be at least $200. The bet was to be settled on January 1, 2011.
At the time the bet was made in 2005, the
price of oil
The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Ref ...
was $65. It soared to an all-time high of $145 per barrel in 2008 before plummeting below $50 per barrel in the same year in the wake of the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. The average price for a barrel of oil in 2010 was $80 ($71 in 2005 dollars), less than the $200 Simmons predicted. Simmons died on August 8, 2010, and the bet was paid out by his colleagues in Tierney's favor.
[Peter Maass
Peter Maass (born 1960) is an American journalist and author.
Life and career
Maass was born in Los Angeles and graduated from the University of California, Berkeley. He has worked for ''The Wall Street Journal'', ''The New York Times'', ''The Wa ...]
, for a ''
New York Times Magazine
''The New York Times Magazine'' is an American Sunday magazine supplement included with the Sunday edition of ''The New York Times''. It features articles longer than those typically in the newspaper and has attracted many notable contributors. ...
'' article called "The Breaking Point," published on August 21, 2005. The article heavily emphasized the
doomsday
Doomsday may refer to:
* Eschatology, a time period described in the eschatological writings in Abrahamic religions and in doomsday scenarios of non-Abrahamic religions.
* Global catastrophic risk, a hypothetical event explored in science and fict ...
claims of Simmons's latest book ''
Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy'', which contains Simmons's prophecy of imminent global catastrophe which he asserted will be triggered by the allegedly soon-coming "peaking" of Saudi oil output, and the supposed domino effect of destruction that will subsequently be wreaked upon the global economy. Tierney's dubious reaction to the article prompted him to call Simmons, introduce himself, and ask Simmons to back up his claims with cash. The friendly wager was immediately worked out over the phone.
Terms of the bet
Of the many claims that Simmons made in the ''Times'' article, his prediction of a tripling in the price-per-barrel of crude oil struck Tierney as perhaps the most incredible. In the
Peter Maass
Peter Maass (born 1960) is an American journalist and author.
Life and career
Maass was born in Los Angeles and graduated from the University of California, Berkeley. He has worked for ''The Wall Street Journal'', ''The New York Times'', ''The Wa ...
article, Simmons was quoted as saying:
"We're going to look back at history and say $55 a barrel was cheap," immonssaid, recalling a TV interview in which he predicted that a barrel might hit triple digits. immonssaid that the anchor scoffed, in disbelief, "A hundred dollars?" Simmons replied, "I wasn't talking about low triple digits."
Tierney focused upon that one detail and the two men fashioned the bet accordingly. Their final agreement was a commitment to tabulate every closing price-per-barrel of oil for each market day of 2010, then average out those prices for the entire year from January 1 through December 31, adjusted for inflation to 2005 prices. If the year-end adjusted average comes out to $200.00 or more per barrel, Mr. Simmons wins. If it averages out to less than $200.00, Mr. Tierney wins. The winner takes the entire pot of US$10,000.00, plus interest—$5,000.00 from both parties, placed in escrow.
The bet was made public just two days later in an op-ed piece by Tierney published in ''The New York Times'' on August 23, 2005, called "The $10,000.00 Question".
Precedent and legacy of the Simon–Ehrlich wager
This bet was admitted by both parties to be a good-natured resurrection of the same spirit and tradition behind the famous
Simon–Ehrlich wager The Simon–Ehrlich wager was a 1980 scientific wager between business professor Julian L. Simon and biologist Paul Ehrlich, betting on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. The widely-followed con ...
which spanned the years 1980–1990.
Tierney was a lifelong friend and protégé of the late
Julian Simon
Julian Lincoln Simon (February 12, 1932 – February 8, 1998) was an American professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a ...
(the winner of the
Simon–Ehrlich wager The Simon–Ehrlich wager was a 1980 scientific wager between business professor Julian L. Simon and biologist Paul Ehrlich, betting on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. The widely-followed con ...
), and eagerly embraced the opportunity to follow in his mentor's footsteps. Tierney is (as was Simon) an avowed
Cornucopian
Cornucopianism is the idea that continued progress and provision of material items for mankind can be met by similarly continued advances in technology. It relies on the belief that there is enough matter and energy on the Earth to provide for the ...
, believing in the ingenuity of humankind to adapt and improvise. Meanwhile, Simmons' ''Twilight in the Desert'' seemed to Tierney to be cut from the same doom-and-gloom cloth as
Paul R. Ehrlich
Paul Ralph Ehrlich (born May 29, 1932) is an American biologist known for his warnings about the consequences of population growth and limited resources. He is the Bing Professor Emeritus of Population Studies of the Department of Biology of St ...
's ''
The Population Bomb
''The Population Bomb'' is a 1968 book co-authored by Stanford University Professor emeritus Paul R. Ehrlich and Stanford senior researcher emeritus in conservation biology Anne Howland Ehrlich. It predicted worldwide famine due to overpopulatio ...
'', a book published in 1968 which later became the impetus for the
Simon–Ehrlich wager The Simon–Ehrlich wager was a 1980 scientific wager between business professor Julian L. Simon and biologist Paul Ehrlich, betting on a mutually agreed-upon measure of resource scarcity over the decade leading up to 1990. The widely-followed con ...
. When that well-renowned wager was settled in 1990, Simon's boomster victory over Ehrlich's doomster philosophies was heralded as a triumph for
Cornucopian economics.
Tierney made unabashed reference to that legendary wager as he gave his apologetic for embarking upon this redux of it:
I didn't try to argue with immonsabout Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the A ...
, because I know next to nothing about oil production there or anywhere else. I'm just following the advice of a mentor and friend, the economist Julian Simon
Julian Lincoln Simon (February 12, 1932 – February 8, 1998) was an American professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a ...
: if you find anyone willing to bet that natural resource
Natural resources are resources that are drawn from nature and used with few modifications. This includes the sources of valued characteristics such as commercial and industrial use, aesthetic value, scientific interest and cultural value. O ...
prices are going up, take him for all you can.
Inclusion of Rita Simon
After the bet was agreed upon (but before it was made public) Tierney immediately called
Rita Simon, the widow of
Julian Simon
Julian Lincoln Simon (February 12, 1932 – February 8, 1998) was an American professor of business administration at the University of Maryland and a Senior Fellow at the Cato Institute at the time of his death, after previously serving as a ...
. She delightedly joined with Tierney's effort to carry on with her late husband's legacy, and even financed one half of Tierney's obligation to the bet by contributing US$2,500.00 of her own.
Simmons's death
Matthew Simmons
Matthew Roy Simmons (April 7, 1943 – August 8, 2010) was founder and chairman emeritus of Simmons & Company International, and was a prominent figure in the field of peak oil. Simmons was motivated by the 1973 energy crisis to create an invest ...
died on August 8, 2010, thus preventing him from personally seeing the bet through to its resolution on January 1, 2011.
Ongoing updates
The price-per-barrel of
crude oil
Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crude ...
was heavily scrutinized by oil industry watchers aware of this bet. Many
peak oil
Peak oil is the hypothetical point in time when the maximum rate of global oil production is reached, after which it is argued that production will begin an irreversible decline. It is related to the distinct concept of oil depletion; while ...
websites made frequent reference to the Simmons–Tierney bet and some made daily tabulations and
adjusted-for-inflation
In economics, nominal value is measured in terms of money, whereas real value is measured against goods or services. A real value is one which has been adjusted for inflation, enabling comparison of quantities as if the prices of goods had not c ...
charts on the latest price-per-barrel. (The price-per-barrel of oil at the time of the bet—August 2005—was around $65.00. The price as of the initial publishing of this article—May 10, 2008—was $125.96; the record high of $147 in July 2008 was attributed by some to a weak U.S. dollar.)
With the dramatic drop in demand and prices for many commodities in the
economic crisis of 2008
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At t ...
, the average per-barrel price for December 2008 reached a post-spike low of $40.88. At the time, Simmons was asked by a reporter if he had any second thoughts about the wager and replied, "God, no. We bet on the average price in 2010. That’s an eternity from now."
The price of oil steadily climbed back to an average of $78.33 for the month of January 2010. As of December 2018, the inflation adjusted price of oil has still not surpassed the July 2008 peak.
Both Simmons and Tierney publicly availed their e-mail addresses with a formal and open invitation to anyone else in the general population who might like to make similar wagers.
See also
*
Price of petroleum
The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Ref ...
*
2000s energy crisis
From the mid-1980s to September 2003, the inflation-adjusted price of a barrel of crude oil on NYMEX was generally under US$25/barrel in 2008 dollars. During 2003, the price rose above $30, reached $60 by 11 August 2005, and peaked at $147. ...
References
External links
* https://www.nytimes.com/2005/08/23/opinion/23tierney.html
* http://www.twilightinthedesert.com/
* http://www.theoildrum.com/ –
The Oil Drum
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Peak oil
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