Barron's magazine interviews highly-followed Goldman oil strategist Arjun Murti, who predicted the current oil "super spike" in 2004. He sees the climb peaking somewhere between $150 and $200 -- which could mean $5.75 gasoline.
Murti dismisses the notion that speculation is driving oil prices to record highs. If so, he counters, why aren't we seeing supply growth?
The end of the super spike will come when oil prices reach a level at which it meaningfully reduces long-term demand. U.S. demand has begun to drop, but have people truly changed their behavior, or are they just driving less temporarily? Outside the U.S. (China, Middle East, Asia) demand is still growing.
Pipeline companies stand to benefit from the U.S. need to expand its pipeline infrastructure. Murti likes Oneok (OKE) and El Paso (EP).
He's bearish on refiners, which stand to lose the most from dwindling demand which cut into gasoline margins, and are being squeezed by increasing ethanol production.
Ultimately, Murti doesn't believe $150-200 oil is sustainable.
Our long-term oil forecast looking out 20 years is [for crude] to fall back to $75 a barrel, or some lower number. The questions are: How long do prices stay high? How sharply do they rise? And do people truly change their behavior or are they just temporarily driving less? It's an unknown at this point.