Oil Wager update

Posted on October 22, 2008 by Steve

Several years ago I was sufficiently impressed by Julian Simon's book The Ultimate Resource to emulate his famous wager with latter-day Malthusian Paul Ehrlich. In my bet, as documented in the dusty archives of Fiat Lux, I argued that the price of a barrel of crude oil would be lower in ten years than it was in December 2005, as compared to the price of a Big Mac. At that time it cost 19.2 Big Macs to get a barrel of light sweet crude.

Simon preferred to compare commodity prices to the consumer price index, or mean wages, to show that the resource is more easily obtained regardless of inflation. My betting partner felt that the U.S. dollar was too unstable to use these indices, so we settled on The Economist's Big Mac Index, which has been fairly flat so far, rising from $3.06 to $3.57.

Today oil dropped into win territory for me for the first time in over a year. We're only about a third of the way through the term, so it will be interesting to see what comes next.