Oil prices rose above $130 a barrel Wednesday for the first time, as supply concerns mounted and the US dollar weakened. Light, sweet crude for July delivery hit a record $130.47 a barrel in electronic trade on the New York Mercantile Exchange after closing at $128.98 in the floor session. By afternoon in Europe, it had retreated to $129.77 a barrel, still up $0.79 in the session.
The June contract, which expired Tuesday, settled overnight at $129.07 a barrel. In London, July Brent crude (North Sea) was up $1.17 to $129.01 a barrel on the ICE Futures exchange in London. Earlier in the session, Brent rose as high as $129.92.
If you have been reading this blog, you’ll notice that I write a fair bit about oil. It is still a subject that I am learning much about. Most of my spare time reading wise is spent on energy issues because it is the one issue that this planet needs to solve thirty years ago as I like to say.
During my tenure at Goldman Sachs, I had the good fortune of working with some incredibly talented people. One of them was Arjun Murti, the Goldman Sachs Oil & Gas Sector Analyst. I read his reports religiously because they are so annoyingly accurate. Today Arjun, tagged as the “oracle of oi” and who has predicted oil at $200 barrel by YE08, was written up in the New York Times Business Section.
Here are some highlights:
An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.
Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.
That would be fine with Mr. Murti, who owns not one but two hybrid cars. “I’m actually fairly anti-oil,” says Mr. Murti, who grew up in New Jersey. “One of the biggest challenges our country faces is our addiction to oil.”
And this opens up for me the opportunity to talk urban planning. We need it badly. Suburbs as they are conceived in the United States will prove in the next 30 years to have been the worst investment of capital ever in the history of mankind. The need is for urban density and mass transit systems. It is not about taking away people’s cars, it is about forcing people to use mass transit to get to work. They keep their cars for personal household and recreational use. But the daily grind of the work commute has to shift to mass transit systems be it light rail or bus rapid transit (BRT) systems. And to introduce some ideas and on the severity of our dilemma, I turn to my former Economics professor, Paul Krugman’s op-ed Stranded in Suburbia.
If I could relive my life, I’d probably would have gotten a degree in urban planning.