Econbrowser: The PR of PO
Posted by Prof. Goose on August 25, 2005 - 1:31pm
JDH has an interesting piece over at Econbrowser on the Simmons $5k PR move/bet/political statement/belief in his cause. (I meant to post this yesterday, but I forgot, I know many of you have been over there already from the comment boxes...). Still very much worth the read if you haven't been there yet.
<kind of inside joke for those who have read the post>
(and one more thing, $2500 (the amount you have to pay to see the CERA report) is still a ridiculous amount of money...but JDH is worth closer to $2500 than CERA is for my money any day.)
</kind of inside joke>
Indonesia cuts oil output forecast
August 26 2005
JAKARTA, Thurs: Indonesia, South-East Asia's biggest crude oil producer, cut its oil production forecast 5.7 per cent to 1.06 million barrels a day this year, after rains disrupted drilling at main fields in Sumatera.
The country has missed its initial target of 1.13 million barrels a day because of a production decline at fields operated by Chevron Corp's unit PT Caltex Pacific Indonesia, PT Medco Energi Internasional, and state oil company PT Pertamina, Energy and Mineral Resources Minister Purnomo Yusgiantoro said yesterday.
"Our oil and condensates output will range between 1.06 million and 1.08 barrels a day," Purnomo said in Jakarta.
http://www.btimes.com.my/Friday/Nation/20050825213231
He wrote to Simmons about possibly creating their own bet, but Simmons demurred, saying "I have had a slew of economists offer to make same bet. I am actually not in bookie business and pondered whether it was even appropriate to make this Visable Wager to help focus people on how absurb we still price energy." (I'm not sure who was responsible for all the typos in this text, but it is how it appears on Levitt's blog.)
Levitt himself seems to be taking a slightly more moderate view, writing: "Whether we should care about 'Peak Oil' boils down to (1) will the cost of supplying oil jump, (2) If it does jump, by how much, and (3) how elastic is demand. As I read through the 100+ comments I got on my last blog on peak oil, it seems that there is strong disaggreement on each of those three points." So this seems to somewhat leave open the possibility of a Peak Oil transition that could be genuinely painful.
(When I was in grad school, we used to go to a bar that also had an oxygen bar. You could pick from 3-4 different colors. I think they also had different therapeutic qualities.)
Water, Oxygen etc. are valuable products. Not to mention CO2, Methane, Iron, Gravity, Neutrinos, Plate Tectonics, the Earth's Magnetic Field, the Moon, the Solar System, Dark Energy, Chimpanzees, Lions, Tigers, Bears, Shrimp, Nematodes, E-Coli, Avian Flu Viruses, Wood Pulp, Mangroves, Tuna, Sharks, and the rest.
And as products, they can be priced.
So in a sense, Simmons really is putting his money where his mouth is: He's deliberately taking crappy odds to make a point. Of course, as a rich banker who thinks oil has already peaked, I'm sure he's already invested much more than that in the futures markets. (And if Simmons does have a selfish financial motive for promoting peak oil, it's probably those investments, not the few cents per copy he gets in book royalties.)