Arjun Murti Eyes the Red Pill.

Bloomberg: Goldman's Murti Says `Peak Oil' Risks Sending Prices Above $105.

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Goldman Sachs Group Inc. analyst Arjun Murti, who roiled oil markets in March by saying crude may reach $105 a barrel, now says that may be conservative if the ``peak oil'' theory is right and world supplies are running out.

The belief that the world's oil supply is close to an irreversible drop is no longer ``on the fringes'' of the market, said a research report by New York-based Murti, who forecasts oil of $50 to $105 a barrel until 2009. UBS AG analyst James Hubbard, a former oil engineer at Schlumberger Ltd., said an inevitable decline in supply will start sooner and be worse than expected unless investment increases for many years.

A jump above $105 a barrel ``is possible if we don't invest the right amount of money,'' Hubbard said in an interview in London. ``There will be a peak in production earlier than expected, and that post-peak decline will be more dramatic than currently assumed unless there is a sustained increase in investment in oil and gas production, greater consumer efficiency and alternative energy sources.''

Goldman's Murti in March skirted the peak oil debate. In a report last week, the analyst said it's something to monitor.

``It is possible that the peak oil theorists are correct,'' he wrote. ``If so, we think that the duration and magnitude of energy commodity price increases would be likely to far exceed what we are contemplating.'' He couldn't be reached for comment.

Without a peak in production, Murti expects the price of New York oil to fall to about $35 a barrel in New York between 2010 and 2014. That matches forecasts from Schroders Plc for $35.50 by 2010 and is lower than Merrill Lynch & Co. predictions for $40 to $45 by the end of the decade.

The debate and high prices are contributing to an increase in investment in new technologies that will help keep oil flowing, said UBS's Hubbard, who wrote in October that some 3 trillion barrels probably remain to be pumped.

Murti ranked third last year among researchers who cover oil and gas companies, according to Institutional Investor magazine.

Goldman, the second-biggest U.S. securities firm, estimates about $50 billion is invested in its commodity index, where crude oil has largest weighting. The bank's view is that oil will average $68 a barrel in New York next year. Prices may stay close to $60 for ``three to five years'' before falling to ``$45 at the most'' by 2010, Jeffrey Currie, the bank's head for commodities research in London, said in August.