Oil Executives Defend Enormous Profits Before Senat

Senators told oil executives Wednesday that high oil prices cannot be explained by supply and demand and the oil industry's concentration - and OPEC price collusion - is contributing to the costs facing consumers.

Executives of the five largest oil companies were appearing before the Senate Judiciary Committee.

Committee Chairman Patrick Leahy, D-Vt., said there's an unexplained "disconnect" between prices - at nearly $130 a barrel - and legitimate supply and demand.

"We need to get prices under control.... We can only conclude that the oil markets have failed," said Sen. Herbert Kohl, D-Wis.

But Shell Oil Co. Chairman John Hofmeister said the prices can be explained, saying, "The fundamental laws of supply and demand are at work."

An Oracle of Oil Predicts $200-a-Barrel Crude

Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel.

Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

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 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.”