April 1, 2005


Oil Surges After 'Spike' Prediction: A Goldman analyst says crude could reach $105 a barrel in 2007. Other experts are skeptical. (Jerry Hirsch, April 1, 2005, LA Times)

Oil and gasoline prices surged Thursday after a Wall Street analyst warned of a coming "super spike" that could send crude to $105 a barrel.

Light sweet crude for May delivery jumped $1.41 to $55.40 a barrel on the New York Mercantile Exchange, $1.32 shy of the record close on March 18. Gasoline for April delivery closed at a record $1.655 a gallon, up 5.88 cents.

In a report to investors, Goldman Sachs Group Inc. analyst Arjun Murti said surprisingly high demand in the U.S. and China combined with a lack of infrastructure to get oil out of the ground had created a supply imbalance that could be corrected only by dramatically higher prices — which in turn would depress demand.

In Murti's super-spike scenario, he estimates that the cost of a barrel of oil will rise to $75 next year and $105 in 2007 before gradually sliding back to just $30 by 2010 as high prices spur investment in oil and cause demand to shrink. But Murti also issued a more conservative forecast in which he raised the investment bank's 2005 and 2006 crude price forecasts to $50 and $55, respectively, from $41 and $40.

he could have saved time by saying: "prices will be coming down in the longer term regardless of the short term."

Posted by Orrin Judd at April 1, 2005 6:55 AM

Once you start hearing reports about $105 a barrel oil, you're back in the same "irrational exhuberence" territory the industry was in around the end of Carter's term, when a slogan going around was "$85 in '85". Or to be more contemporary, it's the fossil fuel equivalent of the Internet tech bubble, and it's now about November 1999...

Posted by: John at April 1, 2005 9:44 AM

The price of oil will plummet when OPEC realizes it doesn't want to drink all the oil. If we don't buy it, then what?

We're in the driver's seat. We can develop alternate energy sources and tap our own oil reserves. It's about time to let the Arabs know we'll getting a bit tired of their posturing.

Posted by: erp at April 1, 2005 10:13 AM

Pretty persistent rumors, eh?

Posted by: Robert Duquette at April 1, 2005 7:30 PM

Most of the estimates of producing oil from coal and similar technologies are ~$35/bbl. So even if the Hulbert followers are correct the price can't stay up there. Of course, the ~$35 does not include the cash necessary to hire a gang of FARC paras to kill all of the NIMBYs, enviromentalistas, lawyers and federal judges in the neighborhood, which will be necessary to in order to get the conversion plants built.

Posted by: Robert Schwartz at April 3, 2005 3:42 PM