New 'super-spike' might mean $200 a barrel oil

HE RATINGS GAME
New 'super-spike' might mean $200 a barrel oil
Goldman's projections foretell persistent turbulence in energy prices
By Steve Gelsi, MarketWatch
Last update: 1:42 p.m. EST March 7, 2008
Print E-mail RSS Disable Live Quotes
NEW YORK (MarketWatch) -- With $100-a-barrel here for now, Goldman
Sachs says $200 a barrel could be a reality in the not-too-distant
future in the case of a "major disruption."
Goldman on Friday also boosted by $10 the low end of its 2008-2012
projected range for crude to $60 a barrel -- significantly lower than
current prices, to be sure, but a possible mark for oil if
"normalized" trends return to the marketplace.
With the dollar's fall continuing and financial markets roiled by the
credit crunch, commodities like oil have been drawing the fancy of
increasing numbers of investors. Accordingly, Wall Street firms have
been eager to adjust forecasts to incorporate fresh data on the global
economy and energy supplies.
Goldman analysts Arjun Murti, Kevin Koh and Michele della Vigna said
prices have advanced more quickly than Goldman had forecast back in
2005, when it predicted a range of $50 to $105 a barrel as part of its
"super-spike" oil theory.
"We characterized the upper end of the band as more likely to be
driven by geopolitical turmoil and that recession was a key risk to
our view," the analysts said. "In fact, oil prices have reached $100 a
barrel without extraordinary turmoil, and the U.S. currently appears
to be in recession."
Tacking on $15 a barrel to all of its oil estimates, Goldman now sees
average selling prices of $95 a barrel for 2008, $105 a barrel for
2009 and $110 a barrel for 2010. The high end of its range is now $135
a barrel -- but Goldman hinted that prices could be headed even
higher.
"As the lack of supply growth and price-insulated non-OECD demand
suggest a future rebound in U.S. gross domestic product growth or a
major oil supply disruption could lead to $150-$200 a barrel oil
prices," Goldman said.
While saying it has a bullish long-term outlook, Goldman acknowledged
that oil prices could correct from recent highs.
Favorite picks among energy stocks include Frontier Oil (FTO:






, , ) and Gazprom overseas.
Goldman also reiterated its view that oil prices could fall as normal
market conditions return over the next four years.
"The core of our 'super-spike' view is that oil prices will keep
rising until demand declines globally on a multiyear basis, resulting
in the return of excess capacity and a lower cost structure,"
Goldman's analysts said. "Given this view, once excess capacity
returns, we think prices can move sharply lower."
The analysts reiterated their "attractive" view on the European energy
sector, but kept a neutral view on the Russian sector due to costs. It
upgraded Transneft and Sibir Energy to neutral from sell after
underperformance, and cut Imperial Energy to sell from neutral on
capital-spending requirements.
Steve Gelsi is a reporter for MarketWatch in New York. MarketWatch
London bureau chief Steve Goldstein contributed to this report.
.

Relevant Pages

  • American Energy Policy, Asleep at the Spigot
    ... American Energy Policy, Asleep at the Spigot ... JUST three years ago, with oil trading at a seemingly frothy $66 a barrel, David J. O’Reilly made what many experts considered a risky bet. ... As gasoline prices climb beyond $4 a gallon, Americans are rethinking what they drive and how and where they live. ... Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress. ...
    (soc.retirement)
  • Re: embracers of lunatic economics(the free market)continue to bite us long after they are dead and
    ... The free-market inflation of oil prices will eventually lead to ... Curtailing energy consumption will slow the economy and prolong the ... for electrical power, including solar power. ... Oil prices dropped and stayed relatively stabile for two decades. ...
    (sci.econ)
  • Top 10 reasons to blame Democrats for soaring gasoline prices
    ... Top 10 reasons to blame Democrats for soaring gasoline prices ... Americans are seeing in their pocketbooks because of Democrats' ... ANWR could be producing a million barrels of oil a day--5% ... Democrat-controlled congress in 2007 was an energy bill that "calls ...
    (alt.politics.bush)
  • Oil falls below $35 ahead of busy earnings week
    ... Oil prices fell to below $35 a barrel today as investors eyed a slew ... Day and on Tuesday the attention of some investors will be diverted to ... Other geopolitical factors also were seen as bearish for prices. ...
    (soc.culture.china)
  • OT - Fuel Prices
    ... The staggering increase in gasoline prices is taking an enormous toll ... stockpile and giving oil companies more time to pay back previous loans ... While the oil companies and their apologists in Washington have blamed ... develop alternative safe and sustainable sources of energy. ...
    (alt.sports.basketball.nba.la-lakers)