American Dream

A new book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, argues that Saudi Arabia is about to run out of oil, and that will devastate WalMart, the suburbs, and the world economy. In response, New York Times columnist John Tierney challenged the book's author, Matthew Simmons, to back up his opinions with a substantial bet.

Simmons agreed to bet Tierney $5,000 that the price of oil will triple, after adjusting for inflation, within five years. While such a huge increase is possible, if it happened it would most likely be due to war or other international tensions than to Saudi Arabia or anywhere else running out of oil.

Tierney was inspired to make this bet by the late economist, Julian Simon, who made a bet with Paul Ehrlich that the price of any raw material that Ehrlich choose would decline between 1980 and 1990. Ehrlich gladly took up the bet, selecting five different metals, believing that the price of those metals would be sure to increase. In fact, they declined and Ehrlich ruefully paid Simon $576.

Simmons probably figures it is a safe bet because, if nothing else, the publicity could increase his book sales by $5,000. Tierney is sharing his side of the bet with Rita Simon, Julian Simon's widow. We will see in five years whether Tierney and Simon end up $5,000 richer.