Betting on Balderdash

John Tierney competently glosses-over the complexities of "proving" who is correct in the longstanding economics debate between the Malthusians and the Cornucopians about the behavior of commodity prices over time. (New York Times, Economic Optimism? Yes, I’ll Take That Bet)
Five years ago, Tierney and an oil markets expert named Matthew R. Simmons made a bet. Simmons, who sadly has passed earlier this year, strenuously warned about the pending effects of a peak in global oil production and accused the Saudi Arabian government of overstating the condition of their remaining oil reserves. Not that the Saudis would ever do such a thing to manipulate the markets, but I digress...
In 2005 Simmons bet Tierney $5,000 that oil prices, which hovered around $65 a barrel, would in 2010 rise past $200. With prices now at $91 and going up, Tierney claims victory and demands respect for his brand of cornucopian macroeconomics: an unbridled faith in the ability of the free markets to regulate our consumption of natural resources.
As many free-market zealots are apt to do, Tierney criticizes the renewable energy industry's need for subsidies while not mentioning how our Government coddles the producers of nonrenewables with a plethora of tax breaks, discounts, waivers, guarantees and other socialized business expenses.
Never once does he mention the environmental externalities which are excluded from the cheap prices that he claims in his bet with Simmons: not a peep about the Exxon Valdez, BP's Macondo well blowout, the poisoning of underground aquifers by natural gas drillers, the TVA's coal ash lagoon disaster, or many more less well-known cases of energy costs not reflected in market prices.
Tierney ought to ask the residents of the Prince William Sound and the Gulf who have lost their livelihoods, the people in Pennsylvania who have lost their drinking water, and those in Tennessee who lost their towns how accurately they think current energy prices reflect the true costs that are exacted.
He really needs to get out from behind his computer.
Even more astoundingly, Tierney touts the success of the Canadian tar sands project in the same paragraph that he mentions how current trends in the energy industry may lead to reduced climate-changing gas emissions. Back in the real world, the Canadian tar sands project is a disaster both in the way that it strip mines vast areas of Alberta's pristine forests and in the way that it creates more carbon dioxide pollution than any other form of energy production.
Matthew R. Simmons, rest his soul, deserves to eat crow over his bet with John Tierney, but only because he should have known better than to make specific predictions about a commodity as chaotic as oil. As for Mr. Tierney, winning a bet is not the same as winning the argument. He has only proven that forecasting is for suckers, and so is blind faith in the "free markets" that are anything but free.

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