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Set the dials for May 22, 2008.
Is Arjun Murti The Oracle Of Oil?
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I’m glad that someone at Foreign Policy has been paying attention.
From The 10 Worst Predictions for 2008:
1. “Barack Obama is not going to beat Hillary Clinton in a single Democratic primary.” —William Kristol
2. “Bear Stearns is not in trouble.” —Jim Cramer
3. “…only a naval power of the United States’ strength could seriously disrupt oil shipments.” —Dennis Blair and Kenneth Lieberthal
4. “[A]nyone who says we’re in a recession, or heading into one—especially the worst one since the Great Depression—is making up his own private definition of ‘recession.’” —Donald Luskin
5. “For all its flaws, an example to others.” —The Economist on Kenya’s presidential election
6. “Arizona’s maverick senator, John McCain, will end up the country’s next President.” –BusinessWeek
7. “These events have the potential to fundamentally alter matter and destroy our planet.” —Walter Wagner
8. “The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” —Arjun Murti
9. “It starts with the taking over of South Ossetia and Abkhazia, which has already happened. It goes on to the destruction of the Georgian armed forces, which is now happening. The third [development] will probably be the replacement of the elected government, which is pro-Western, with a puppet government, which will probably follow in a week or two.” —Charles Krauthammer
10. “I believe the banking system has been stabilized. No one is asking themselves anymore, is there some major institution that might fail and that we would not be able to do anything about it.” —Henry Paulson
Maybe we should pay less attention to all of these people in the future.
Some of these people I am not familiar with. Some of them, such as William Kristol, Jim Cramer, Charles Krauthammer, Henry Paulson, and even BusinessWeek; I’ve never much cared for. Only arrogant fools think they can predict the future.
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For years Warren Buffett has been referred to as the Oracle of Omaha. Now it appears that many would like to crown Arjun Murti as the Oracle of Oil.
From What Mr. Crude Oil Sees Ahead by Lawrence C. Strauss:
In 2004, Arjun N. Murti, a Top Energy Analyst At Goldman Sachs, published a report predicting "a potentially large upward spike in crude oil, natural gas and refining margins at some point this decade." It was a controversial call, with crude around $40 a barrel at the time. But it was right on the money.Read the Barron’s interview here.
Four years later, crude is trading around 139.
Murti sees energy in the later stages of a "super spike," in which prices rise to a point where demand drops off. In a note last month, he wrote that "the possibility of $150-to-$200-per-barrel oil seems increasingly likely over the next six to 24 months."
With supply growth constrained and global demand staying strong, prices must rise further, in Murti's view. Barron's caught up with him last week in his New York office.
The 39-year-old analyst doesn't give many interviews and keeps a low profile, preferring not to be photographed. But his strong views on energy have resonated across the financial markets.
Are his predictions a self-fulfilling prophecy? If oil spikes and hits $200 per barrel, then surely his own words would have had a major impact on oil hitting this lofty level.
Unlike other analysts who seem to crave the spotlight, Murti prefers to remain in the shadows, out of view. According to a recent WSJ article, Murti is actually decidedly anti-oil, and believes that the "super spike" in prices will eventually lead to a significant decline in demand for oil.
Where will Murti's "Super Spike" call rank amongst the all-time greatest analyst calls ever? Time will tell. One thing is for sure though - when Murti speaks now, people will listen.
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From An Oracle of Oil Predicts $200-a-Barrel Crude by Louise Story:
“The fact that the U.S. gasoline demand can be down and that the U.S. gasoline consumer is no longer driving world oil prices is a monumental event,” Mr. Murti says. He spends most of his time talking to money managers and analysts, many of whom keep asking him if oil prices will stay high if speculators abandon the market, and says he applauds investors for driving up oil prices, since that will spur investment in alternative sources of energy.
High prices, he says, “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 analysts like him might one day be a thing of the past. That’s fine with Mr. Murti.
“The greatest thing in the world would be if in 15 years we no longer needed oil analysts,” he says.
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From Wall Street's crude ways by David Weidner:
The hubris and insensitivity of energy trading is best personified by Goldman Sachs. A Goldman commodities analyst famously predicted in March 2005 that oil would reach $100 a barrel. At the time, a barrel was trading about $55. The prediction led to a lot of ridicule, but it also drove up prices in the short term, and ultimately came true.
It also led to speculation that Goldman was trying to goose the market because it had a huge position in oil derivatives.
Now, Arjun Murti, the same analyst who made the earlier prediction, is back, promising $200 oil this year. Murti is again talking about demand, but again, world consumption doesn't suggest the price should double.
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