Goldman's Murti Says $150 to $200 Oil 'Likely' in Next Six to 24 Months

from Bloomberg:



Goldman's Murti Says Oil `Likely' to Reach $150-$200 (Update4)

By Nesa Subrahmaniyan

May 6 (Bloomberg) -- Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.

``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5.

A report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December. China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games.

U.S. gasoline demand typically climbs going into the summer season when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.

China Consumption

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East. .......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRKcAZi630&refer=home

inflation. Otherwise, the entire transportation system would be permanently shut down. The airlines and trucking are teetering on the brink of bankruptcy now.

The only bright side of this inaccurate prediction is that it might lend some impetus toward alternate energy projects.

Yeah, Goldman missed it in 2005 when they predicted $105 oil... by 2009!

the current 122.00 has already pressed the airlines and trucking industries to their limit. Further, food prices are moving up in tandem with the oil prices. In addition, the dollar devaluation has stressed the U.S. economy.

It is a mathematical fact that the airlines could not absorb an additional 75% rise in fuel costs. That's too much to pass on the the passengers.

The oil merchants plan their prices based on what they believe that the market can and will accept.
My prediction is that oil will continue to rise until definite signs of collapse are showing up in various industries that require heavy oil usage. At that point, they will hold the oil price at that level.

The obvious solution is for governments worldwide to make a major push toward alternate energy sources. It's doable and in the long run is the way to break the oil monopoly. If the alternate energies could take up as much as 25% of energy supply, it would force the oil price down.

Just because the 2005 prediction turned out to be accurate does not mean that the $200 per barrel prediction also will be correct. I think the Goldman-Sachs prediction was launched to influence stock prices.