No one loves an economist, but let's give one credit where it's due

I wonder how many people will even pause to give a thought to the guy, much less give him any credit. After all, no one particularly loves an economist, especially the ones that work at Wall Street banks. But Murti became a punchline for radio jocks around the world. For a while.

When the report came out, the oil market rallied by more than a dollar as word of his forecast reached the floor of the NYMEX. A day later, crude hit a new record high of $58 per barrel -- small change compared to Friday's settlement of $110.21.

Murti, who was at the time described by Fortune magazine as "press-shy by nature," became a strange sort of celebrity -- largely because commentators thought he was a crank. He became a lightning rod for angry investors, and energy regulators around the world who thought they had found a smoking gun to support the theory that hedge funds and banks were somehow tied up in a conspiracy to drive up prices.

Some accused Goldman Sachs of manipulating the market through the report to benefit its energy-trading desk.

There were calls from some commentators for a government investigation. Hank Paulson -- then CEO at Goldman Sachs and now the US Treasury Secretary -- himself stood up to defend Murthi at an annual shareholders' meeting.

So imagine the satisfaction if you are Murthi now. But more importantly, it's worth thinking about why some analysts have been predicting an increase in prices to these levels for many years now.

The Goldman Sachs report said resilient oil demand growth, a growing premium at the time for light, sweet crude like WTI above heavy, sour, and sharp increases to the industry cost structure, were all going to whip oil prices higher. US gasoline prices had plenty of room to go up before rising to a level of gasoline spending relative to the US economy that is near the heights reached in 1980-1981.

The report and others like it predicted that $105 could be conservative, especially if there was a supply disruption in a major oil exporting country.

Fast forward three years. How much has actually changed, even with the US financial problems of the past six months?