The Oracle of $200 Oil

Wed, 21 May 2008 16:47:39 GMT

clipped by: Joshua Zumbrun
clipper's remarks: Goldman Sachs made headlines with his prediction of oil as high as $200 a barrel. What does this mean? $6 a gallon at the pump.

Is this rapidly becoming a self-fulfilling prophecy?

The somewhat breathless coverage here reminds me of an old parable from the 90s. An analyst named Henry Blodget predicted in 1998 that Amazon.com stock would hit $400 (when it was currently trading at $250ish). In a frenzy, Amazon hit it within a month. Of course, it went on to collapse spectacularly in 2000. A decade later, Amazon's never returned to trading at that level...

Clip Source: www.nytimes.com

Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.

Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.

Analyst Warns of $200/Barrel Oil*

Thu, 08 May 2008 01:50:29 GMT

clipped by: merrie
clipper's remarks: *One barrel of crude oil is 42 gallons (or $4.76 per gallon)
In the Cato-at-Liberty blog post "Is There an Oil Price Bubble?" Cato senior fellow Jerry Taylor writes: "The most recent Fed actions to combat the deteriorating state of the macroeconomy added even more fuel to the oil price fire. With market actors increasingly convinced that the Fed is willing to entertain inflation in the course of injecting liquidity into the market, investors are looking for investments to hedge against inflation. And what do you know? Returns on commodities have historically been better during inflationary periods than during non-inflationary periods. Ben Bernanke thus sent another strong infusion of cash into commodity futures -- again, largely into oil and gas futures.

Clip Source: www.cato.org

"Crude oil prices could surge to $200 a barrel in the next two years, according to the Goldman Sachs analyst who three years ago correctly predicted a price 'super-spike' above $100 a barrel," Financial Times reports. "The warning by Arjun Murti came as oil prices hit a fresh high above $122 a barrel, boosted by supply disruptions in Nigeria, lower output in Russia and continued robust demand in China ahead of the Olympics."

"The increased demand for oil futures drives spot prices because it diverts oil from immediate use into inventories. The stepped-up infusion of oil into public inventories (the Strategic Petroleum Reserve and the emerging state inventory maintained by the Chinese government, for instance) has also contributed to the diversion of oil from immediate use and thus, has further increased prices."

Tags: goldman sachs, super-spike, arjun murti, strategic petroleum reserve, china's emergency inventory, oil diversion

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The Oracle of $200 Oil

Analyst Warns of $200/Barrel Oil*