Oil prices shot up more than $11 to a new record above $139 Friday after Morgan Stanley predicted prices would hit $150 by the Fourth of July. The unprecedented jump is all but certain to drive gas prices well past the $4 mark in the coming weeks.
Oil’s meteoric surge, which pushed prices more than 8 percent higher in a single day, added to a huge increase Thursday to cap oil’s biggest two-day gain in the history of the New York Mercantile Exchange. The burst higher — which also came on rising Middle East tensions — also raised the prospect of accelerating inflation by adding to already strained transportation costs.
That gloomy outlook sent stocks tumbling, taking the Dow Jones industrials down more than 300 points.
Call me surprised.
If you had asked me two years ago if oil could come close to $140 amid a US slowdown in the absence of a major interruption in supply, I would have hedged a bit, but ultimately said no.
For a while it looked like a boneheaded move. At the end of 1998, the price of oil fell below $10 per bbl. Regular gas sold for 90Ã‚Â¢ a gal. While Internet billionaires were being minted to the right and left of him, Rainwater was getting poorer by the day.
You can guess the rest of the story. The dotcoms imploded; the price of oil climbed, climbed and climbed some more–and Rainwater’s energy bet came to look like one of the better investment calls of our time. It has netted him about $2 billion, vaulting him from the mid-200s on Forbes magazine’s 1999 list of the 400 richest Americans to No. 91 last summer (with $3.5 billion overall).
So guess what Rainwater did a few weeks ago, right after oil prices topped $129 per bbl. for the first time? “I sold my Chevron,” he says. “I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything.”
This news, disclosed here for the first time, is a big deal. Lots of Wall Streeters–loudest among them the hedge-fund legend George Soros–have been warning lately that speculation has inflated oil prices into a soon-to-pop bubble. But talk is cheap–this is something more. One of the biggest oil winners of the past decade has decided to get out.