Michael Kanellos

Oil could hit $90 a barrel, or $200 May 9, 2008 at 2:07 PM

 The world could see an unprecedented spike in oil prices toward $200 a barrel that could plunge the world into a panic.

Or it might drop to $90 a barrel after a new president is inaugurated in 2009 as the Saudis try to cozy up to a new U.S. president.

Arjun Murti of Goldman Sachs put out a recent report, according to the Telegraph, that demand from China and lackluster growth in supply will push oil near the $200 mark over the coming months.

“We believe the current energy crisis may be coming to a head. A super-spike end game may be in the early stages of playing out,” Murti wrote, according to the paper.

But wait! Edward Morse over at Lehman Brothers in a report speculated that Saudi Arabia may boost output by 1.3 million barrels a day next year, more than the growth in demand. This could push prices toward $90 a barrel, according to the report, as reported by Forbes.  The Saudis recently said that three new fields have entered production. And the country has used oil for diplomatic overtures before. A weakened correlation between the dollar and oil prices may also help push prices down.

Lehman, however, admits it predicted oil would drop to $90 a barrel this quarter in an earlier report. It sells for around $122 to $126 a barrel. Hurricane season could also hurt a drop in prices.

I also had my cat, Fraulein Katze, walk across my keyboard. She came up with $132 a barrel. (disclosure: Frost and Sullivan sometimes employs her as a consultant.). 

News like this really must be tough on survivalists. I mean, do you stock up on more canned foods and ammo, beating the surge in demand that’s going to occur, or do you unload all that powdered milk you have stored in that cave near McGill, Nevada  and buy more armor for the Hummer?

No matter who you believe, however, it does point to an essential truth in the oil business.  It is wildly unpredictable. I recall once attending an oil technology conference in Qatar in 2005.  Oil had just come down from $70 a barrel to the mid-50s range.  Despite the drop, companies were enjoying a surge in profits. So you’d expect everyone to be excited.

Not so. Most of the speakers went out of their way to remind the audience that boom times only last for brief periods. 

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