Oil prices surge after $105-a-barrell forecast

Research report forecasts dramatically costlier crude and suggests a 'super spike' -- fueled by 1970s-style inflation -- could send prices well into triple digits.

March 31st, 2005, Reuters

Oil markets have entered a "super-spike'' period that could see 1970s-style price surges as high as $105 a barrel, investment bank Goldman Sachs said in a research report Thursday that sent oil futures spinning.

U.S. light crude settled up $1.41 to $55.40 a barrel after peaking at $56.10, within $1.50 of the $57.60 record high struck on March 17. Benchmark Brent futures jumped $2.20 to $54.29 a barrel.

Oil prices have climbed around 25% this year as signals that rapid demand growth in emerging economies China and India will strain world supply ignited heavy buying from big-money funds.

U.S. oil futures on the New York Mercantile Exchange have averaged $50.03 per barrel so far in 2005.

Goldman Sachs is the biggest trader of energy derivatives, and its Goldman Sachs Commodities Index is a widely-watched barometer of energy and commodities prices.

Goldman pointed out thin spare capacity in the energy supply chain, and long response times for bringing on supply additions, as well as robust demand in the United States and in developing heavyweights China and India, despite the recent rapid increase in energy costs.

Goldman said that were it to assume gasoline spending needed to reach 1970s levels to destroy demand, its upside super-spike estimate would be $135 per barrel for New York crude.

"Based on our analysis of gasoline spending and the economy noted above, we estimate that U.S. gasoline prices may need to exceed $4 per gallon."

Privacy Policy

Copyright 2005 Energy Exchange, Inc  All Rights Reserved.
      

The Energy Exchange, Inc

Telephone: (281) 684-3557

Fax: (281) 966-6958

NOT AN OFFER TO SELL OR A SOLICITATION TO BUY SECURITIES