Goldman Oil Bull: I’m Not a Crackpot

Goldman’s primary oil analyst, Arjun Murti, is smart enough not to grant many interviews these days (why provide fodder for lawsuits?). But his colleague, commodities analyst Jeffrey Currie, is happy to defend the firm’s oil-to-$150-to-$200 view. WaPo:

“World GDP wants to grow at 3.8 percent, whereas the best we can come up with for [oil] trend supply growth is 1 percent,” he said. “So something has to give. And that means prices have to rise to curtail demand growth.”

Speculators driving prices higher? Please. This is a demand-driven spike, Currie says, which makes it different than the ones in the 1970s:

When prices soared in the ’70s, the Iranian revolution and subsequent Iran-Iraq war took 10 percent of the world’s oil off the market. Demand had to be trimmed because supplies were cut.

“This time around, supply didn’t collapse like the ’70s. Rather what we saw was demand in emerging markets exhausting the capacity of the system to deliver or produce oil. That separates this period from what we’ve seen before.” It is, he says, “much more of a demand shock this time around.”

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