Against the Smart Money?

I'm a little less sanguine than Ron appears to be below about the Tierney/Simmons bet over the price of oil. The whole "Cornucopian" argument, after all, runs something like this: As resource A becomes increasingly scarce, the price rises until market pressure spurs some combination of a shift to subsitute resources B, C, etc. and technology to make more efficient use of A (or to allow resources X, Y, and Z, to act as substitutes whereas previously they hadn't been). The key thing here is that the argument has prices rising first as part of the mechanism. So if we were talking about, say, 2030 or 2050, I'd probably be happy to take the Tierney side of the bet. But the current technologies that use oil—millions of vehicles, and a network of petroleum filling stations to support them—aren't going to be replaced overnight with a wave of a magic market wand. If the killer energy app were developed tomorrow, it would still take a hell of a long while to make it a viable substitute for oil for most people. I find the Tierney/Simon argument generally plausible, but I don't know how plausible I find it on the timescale contemplated in this bet.

Addendum: OK, after having looked at some of the comments here, as well as my friend Tim Lee's post noting that the $200/barrel projection is way out of line with the futures market's estimate, I'm willing to buy that Simmons has taken the sucker bet here. My point was really just that it's too quick to assume that resource prices will drop over any particular time scale: The argument for prices dropping in the long term relies on the idea that they sometimes go up in the short term, and you need to look at the actual details of the case to make a decent guess at what the relevant time scales are.