THERE is only one rule when it comes to the availability of oil: experts are always convinced it will run out – but it never seems to. Brent crude is now at close to $75 a barrel, which is high but hardly excessively so by historical standards. There will be upwards price pressure in the aftermath of the BP disaster and the clampdown on new drilling, though if prices do rise enough the incentive to find more of the black stuff will increase commensurately, especially in countries with a more liberal exploration policy, and this ought to keep a lid on prices.
But one thing is clear: the peak oil theorists, who constantly predict that prices are about to explode, keep on getting it wrong but are never sufficiently held to account by a gullible media. As Mark Perry, a professor at the University of Michigan, reminds us, it was five years ago that Houston-based Matthew Simmons (a leading peak oil man) and the unusually sensible New York Times columnist John Tierney bet $5,000 on the price of oil. The wager was based on the average daily price for 2010, adjusted for inflation. If the inflation-adjusted oil price averages $200 or more, Simmons wins $10,000, and if the average price this year is less than $200, Tierney wins. As Perry points out, average oil prices this year won't even be anywhere close to $100, and will probably average less than $70, far below the $200 price predicted by Simmons. Only a total catastrophe would ensure the price would average $330 per barrel for the rest of 2010 – which is what would be needed for Simmons to win his bet. He will have to hand the cash over and eat humble pie.
The oil industry is having to spend vast amounts to keep production at elevated levels; it is becoming harder to find new sources of oil. Demand has been low, thanks to the recession. But the biggest driver of prices over the next few years will be political factors – such as bans on drilling – rather than any inherent scientific or technological constraints.
ECONOMICS OF FOOTBALL
Freakonomics, eat your heart out. The latest issue of the London School of Economics’ CentrePiece contains some fascinating insights on the World Cup and football, from an economic perspective. Among the findings are that two-footedness – the rare ability to use both feet equally well to pass, tackle and shoot – commands a large wage premium. Research by Alex Bryson and colleagues finds a clear link between top performance and high wages among professional football players. But are teams able to appropriate any of the returns to employing two-footed players? The answer, it seems, is no: the proportion of two-footed players in a team does not significantly affect the number of points the team gets at the end of the season.
Here’s another fun stat. New salary contracts for Premier League referees have improved their performance as measured by the number of yellow and red cards issued per game. The research reveals that, since the introduction of the new contracts in the 2001/02 English football season, referees have issued half a card less per game. Other studies have shown a strong negative relationship between the number of cards issued and subjective assessments of referees’ performance by expert panels. On average, referees show three cards per game: this research finds that the new contracts have led to a reduction of around one sixth. Happy days.
allister.heath@cityam.com
