Lord "Narayan" tells Market Futures

WASHINGTON: They are calling him Arjun "Spike" Murti, but his real middle name is Narayana, the supreme manifestation of the Hindu God Vishnu.

Supreme he is, in the oil world. The little known Indian analyst at Goldman Sachs has become a cause célèbre -- or a doomsday prophet -- for his forecasts about oil prices, based on what he calls the "super-spike" theory, predicated on rising demand for crude and limitations in refining capacity.

Murti, 38, now a managing director at Goldman Sachs, first came to the fore as far back as 2003-2004 when he predicted that oil prices would breach $80 a barrel when it was still in the 30s. He was sneered at. He was mocked again when he predicted in 2005 that it would double from $50 to $100 before the end of the decade.

Last month, when he forecast that a barrel of oil could even touch $200, no one was laughing as it surged to $125 on Friday.

So little is known about Murti that it is driving the info-hungry media batty. Unlike many analysts, he does not appear on business television; he does not give interviews (he did not respond to emails for this story), and there are no pictures of him in the public domain.

Database searches do not provide much information (other than his dire forecasts) except that he lives in New Jersey with his wife Rita and sold a million dollar home couple of years back. And oh, he ran a 5km race in Summit, NJ in 2006, timing 24:49m.

He's the phantom analyst who's got the world market spooked. Some of what he is - a blunt-speaking, candid analyst - can be gleaned from his one appearance before the US House Committee on Energy and Commerce in July 2004, where he is introduced as a "Managing Director and Senior Equity Investment Analyst" covering the oil sector at Goldman Sachs, his lair for nearly a decade.

In a trenchant testimony that clearly spoke to the crisis developing today, Murti basically tells US lawmakers that the country is up schitt creek, to use that euphonious euphemism, unless it weans itself away from gas-guzzling SUVs, particularly since it has not build any new refineries for the past 30 years and the administration offers few incentives to energy companies to do so.

"The lack of fuel switching options for transportation fuels and consumer preferences for large, powerful, and comfortable vehicles are the key reasons oil demand...Very simply, most Americans would rather own a large, gas-guzzling SUV and pay more for gasoline than an embarrassingly cramped but fuel-efficient Mini," he tells the Congressional panel.

"In our view," he continues, "it would be logical for the US government to proactively implement policies that encourage a reduction in the growth rate of oil demand. We note that the cost of waiting will likely result in much greater economic damage over the long term than the short-term inconvenience of no longer being able to buy an inexpensive SUV as an example."

Examples of logical demand reduction choices he suggests include *Disincentivize the use of SUVs for mass markets *Encourage market adoption of hybrid vehicles *Introduce incentives to use mass transportation in major population centers (e.g.,tax city driving during certain hours of the day) etc.

Obviously, few one paid any heed in the US - and in India for that matter, which has blindly followed American fossil fuel-based auto culture. "Maybe he's a big Buffy fan or something," one blogger sneered, referring to the vampire slayer in the film and TV series, when he first forecast the sharp spike in oil prices. Some conspiracy theorists suggested darkly that his predictions were aimed at helping energy majors rake in windfall profits.

But many in the financial media backed him. "Murti's report is a thoughtful, 30-page piece of logical analysis that was grossly oversimplified," noted Fortune , dismissing the notion of insider trading as "idiotic." Newsweek's Fareed Zakaria noted as far back as 2006 that given the consumption patterns in the US, which he called the "gorilla of globas gas," Murti's forecast did not look bubbly anymore.

Murti himself never once attributed the demand from India, which consumes 2.5 million barrels of oil a day (one third of China and one eighth of US) for the spike. Today, most doubters of Murti's spike theory stand punctured as price for a barrel of crude moves up from looking like a basketball score to a Twenty20 total.

As they moan about paying $3.65 a gallon at the pump, Americans could well be muttering Narayana, Narayana...

Courtsey: The Times Of India
Title As :
Mystery Indian analyst spooks world economy
10 May 2008, 1155 hrs IST,Chidanand Rajghatta,TNN
Direct Link : Mystery Indian analyst spooks world economy-Intl Business-Business-The Times of India

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“In this market, the person who makes money will be he who knows when to do nothing."

Thanks for pointing to a nice article. And US Pres. Bush is busy talking about us eating more (when it is shown that americans eat 5 (five) times more than we do). I particularly thought that Murti's reference to american penchant for gas guzzling vehicles WITH NO REFERENCE TO INCREASED EMERGING MARKETS APPETITE was very interesting, and thought provoking.

The way I interpret this is: We start with such a low base on the consumption curves that even though our y-on-y increase SEEMS high, we are just making our presence felt on a global scale against the consumption patterns of the developed world.

In other words, it is the developed world that has to learn to tighten their belts in most everything they consume. Aint' that a switch? Just imagine how difficult it will be for generations that grew up on 'problems of plenty' to even accept this reality?! And how difficult it'd be for their politicians to even support such measures that'll go against the deeply ingrained nature of the lifestyles of their masses?!

IRAQ had no WMD's, it was an oil war. I wonder who's next? We know now to what extent they can go to preserve their lifestyles. Dr. Ravi Batra had said that the dollar's value will be America's achille's heel. Wonder what Murti thinks about the value of the gold? Dr. Batra had suggested moving in gold way back in late 80s...

Paresh