Goldman’s Murti Says `Peak Oil’ Risks Sending Prices Above $105

Dec. 19 (Bloomberg) — Goldman Sachs Group Inc. analyst Arjun Murti, who roiled oil markets in March by saying crude may reach $105 a barrel, now says that may be conservative if the “peak oil” theory is right and world supplies are running out.

The belief that the world’s oil supply is close to an irreversible drop is no longer “on the fringes” of the market, said a research report by New York-based Murti, who forecasts oil of $50 to $105 a barrel until 2009. UBS AG analyst James Hubbard, a former oil engineer at Schlumberger Ltd., said an inevitable decline in supply will start sooner and be worse than expected unless investment increases for many years.
A jump above $105 a barrel “is possible if we don’t invest the right amount of money,” Hubbard said in an interview in London. “There will be a peak in production earlier than expected, and that post-peak decline will be more dramatic than currently assumed unless there is a sustained increase in investment in oil and gas production, greater consumer efficiency and alternative energy sources.”

While Saudi Arabian Oil Minister Ali al-Naimi and Exxon Mobil Corp. President Rex Tillerson say oil supplies will last for decades, energy traders are increasingly debating the amount of available crude. Oil’s two-year jump to about $60 a barrel came as rising demand from China surprised suppliers, who had failed to spend on new pipelines, rigs and refineries.

Investors who back the peak oil theory, such as Boone Pickens, a Dallas hedge fund manager and former oil executive, have fueled the price rally of the past two years, during which oil almost doubled, to reach a record $70.85 in August. Prices ended last week at $58.06 in New York.

Bloomberg