Yep, $100+/barrel is here to stay

I wrote a post earlier in the month about $200/barrel oil. Here's an interesting piece on the Goldman Sachs analyst whose been at the forefront of these predictions. At the very end of the article there are some interesting quotes by oil companies about where they think oil prices will settle.
Shell: $35-$65/barrel
ConocoPhillips: $90/barrel
Chevron: says Shell's estimate is too low
ExxonMobile: no comment

What does everyone think? Will this stimulate innovation? Or bring the economy to a grinding halt?

'Super spike' oil analyst gains a lot of Wall Street cred

By Louise Story

Wednesday, May 21, 2008

Arjun 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.

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

An analyst at Goldman Sachs, 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 that oil would breach $100 a barrel.

Few are laughing now. Oil shattered yet another record Wednesday, as the price of light sweet crude for July delivery rose above $132 on the New York Mercantile Exchange. Prices are 99 percent higher than a year ago, according to Bloomberg News.

Murti, 39, argues that the world's seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits.

But the grim calculus of Murti's prediction, issued in March and reconfirmed two weeks ago, is enough to give any American pause: At $200 a barrel for oil, gasoline could cost more than $6 a gallon, or about $1.60 a liter, in the United States. U.S. pump prices are now around $4 a gallon.

That would be fine with Murti, who owns two hybrid cars.

"I'm actually fairly anti-oil," said Murti, who grew up in New Jersey. "One of the biggest challenges our country faces is our addiction to oil."

Murti is hardly alone in predicting higher prices. T.Boone Pickens, the oilman turned corporate raider, said Tuesday that crude would hit $150 this year.

But many analysts are no longer so sure where oil is going, at least in the short term. Some say prices will fall as low as $70 a barrel by year-end, according to Thomson Financial.

...

Murti said he "applauds" investors for driving up oil prices, since that would spur investment in alternative sources of energy.

High prices, he said, "send a message to consumers that you should try your best to buy fuel-efficient cars or otherwise conserve on energy." Washington should create tax incentives to encourage people to buy hybrid cars and develop more nuclear energy, he said.

Of course, if lawmakers heed his advice, oil industry analysts like him might one day be a thing of the past. That is fine with Murti.

"The greatest thing in the world would be if in 15 years we no longer needed oil analysts," he said.

U.S. oil executives questioned

Executives with big oil companies on Wednesday gave a wide range of estimates when U.S. lawmakers asked them how high oil prices should be, Reuters reported from Washington.

At a hearing on oil prices before the Senate Judiciary Committee, John Hofmeister, president of Shell Oil Co., the U.S. arm of Royal Dutch Shell, said that his company could be successful with oil prices at $35 to $65 a barrel, well below the record U.S. crude oil futures price of $132.73 a barrel reached Wednesday.

"I think in a range - somewhere between $35 and $65 a barrel - is what has been consistent in our ability to run a successful company," Hofmeister said.

Executives with Chevron and ConocoPhillips disagreed.

"I believe that the incremental cost of supplies is something above $90 a barrel," said John Lowe, executive vice president of ConocoPhillips.

Peter Robertson, vice chairman of Chevron, also said that Hofmeister's price range was too low to allow companies to break even.

J.Stephen Simon, a senior vice president of Exxon Mobil, declined to give a price estimate.