The price of oil will settle between $40 and $55 a barrel, said Paul Gulden, manager of the Pax World Growth Fund, in a teleconference call April 19 (when oil was at about $50 a barrel). "I see continued volatility in the oil sector, where a terrorist activity or other supply disruption could lead to a brief ‘super spike' in prices" of $100 or more, he added.
Mr. Gulden outlined his views on how bad the shock in oil price will get and suggested a number of oil and natural gas companies and production-services companies.
"Is it possible? It is the ultimate goal of Osama bin Laden and al Qaeda to replace the Saud family in Saudi Arabia?" Mr. Gulden speculated. "If it looks like they will be successful, you'd have a scare in the world oil markets (and a rise in price). Would it be sustainable? No."
"There is some fear factor in the price of oil ... and it will probably be there for some time," he added. Without the fear factor, he said, oil would be about $35.
"I think there has been a permanent adjustment in the price of oil and (securities) analysis haven't fully figured in" new higher price ranges for oil. For investors, "there is lots of upside in energy companies and oil service companies," he said, adding that the economy's adjustment to the higher price of oil "will be ultimately successful" over the next three years.
As for alternative energy sources, Mr. Gulden said, "There isn't anyone out there making money at it." It will be "in excess of five years before you see anybody make money ... probably closer to 10 years before any one of these alternative sources could be meaningfully profitable."