Energy tycoon Boone Pickens says "we've seen $40 oil for the last time" and expects "$10 natural gas" probably within "four months"
Oilman Boone Pickens, who came to prominence in the '80s by raiding companies such as Gulf, Phillips, and Unocal (UCL ), has bet big lately on rising oil prices -- and won. Pickens has guided his Dallas-based fund-management firm BP Capital with a prescient prediction that oil would hit $50. His BP Capital Energy Commodity Fund has jumped 390% for the year, and his equity fund has risen 70%. Here's what Pickens, 76, had to say in a recent meeting with BusinessWeek editors:
On where oil prices are headed:
I'll say it: $60 before $40. I think that will happen. I think we've seen $40 oil for the last time.
On rising gasoline prices:
I think this country finally digested $2 gasoline. How much above $2 can we stand? I don't know. But I feel...when the next car is bought, there's going to be a lot of conversation about [it taking] $100 to fill it up. That's going to change some thinking as to what kind of car you buy.
On where the U.S. should get oil:
[Canada's Tar Sands] have the same reserves, 250 billion barrels, as the Saudis have. To bring it up to [Saudi production levels], the cost would be somewhere around $150 billion or $250 billion. That's not that bad -- in that you don't have to have an army and a navy protecting it.
On the cash-rich oil majors:
What the industry is short of are drillable prospects. That's the missing link. They're drilling everything in sight. But looking for oil and gas around the world -- well, gas is easier, but oil is extremely difficult, and prospects are short -- they want to do it. It isn't the case that somebody's trying to sit on the cash.
On drilling in the Arctic National Wildlife Refuge:
I say leave it for another generation. That's a 2 million-barrel pipeline with 700,000 barrels in it right now. So all you could do is 1.3 million [more]. We're importing daily 10 million barrels of oil.
On natural gas, which hit $7.63 on Oct. 20:
You're getting ready to see $10 natural gas. The reason you know that you are is [because of] heating oil. Heating oil is in direct competition with natural gas, and it [has set record prices]. So you're headed in that direction, and we'll probably get there [within] four months. So that will become a problem for the country.
On leaner times, when BP Capital lost money in 1997 and 1998:
I struggled through the '90s. I struggled to the point of depression. I couldn't get anything to work. I really got down in the '90s. Then, you had this turnaround. Now it looks like everything you throw is a strike.
On the viability of wind energy:
The best place to put a wind farm would be on the water, because the wind is most consistent on the oceans. [But] somebody's got to see them. I think that will be a problem, to deal with the appearance of them. It may not be [a problem] if you're cold and you've got to have power.
On being a senior:
I don't take a salary [at BP Capital]. You know why? I get my Social Security.