Boone Pickens Follows The Oil

By Maria Bartiromo

The legendary Texas oilman T. Boone Pickens was at his ranch in the Northeast Panhandle holding the yearly meeting of his hedge fund BP Capital when I caught up with him. I reminded him that in May, 2005, he predicted that gasoline would hit $3 a gallon. Nice call. Now, despite recent declines, from a spot-market high of $78.84, according to Platts, Pickens is not writing off another surge in oil prices.

The price of oil has fallen from its highest levels. Has the peak been seen yet?

Well, let's go back to what I said. Didn't I tell you we would see $80 oil? We saw almost that. [The oil market] has done exactly what we just fell off faster than we thought. But you are still confronted with the geopolitical problems we've been facing for a couple of years. Right now the economy is slowing. Demand is slowing. But we are talking about a short period of time here. You will have to have some geopolitical event to get to 80 again before [2007], but we will see 80 in a normal market next year.

The recent discovery in the Gulf of Mexico is said to be one of the biggest finds in history. How significant is this?

It was a nice discovery. Is it going to make any difference in the price of oil? No. I have heard reports it's 15 billion barrels...that would be larger than Prudhoe Bay. I think the discovery [will prove to be] much lower. Will it impact gas prices? No. Hats off to Chevron (CVX ), Devon (DVN ), and Statoil (STO ), but it'll take several years to get it into production.

Speaking of Prudhoe Bay, what about the breakdown of the BP pipeline there that's causing disruptions in Alaskan oil?

BP is a tightfisted operator, and they pushed too far. A culture of being too tightfisted can develop in an organization, and I am not so sure that hasn't happened at BP. When it does, it starts to show up in your maintenance. I wouldn't put any money in BP right now. [Pickens' firm, BP Capital, has no connection to BP.]

Will other discoveries be found in the Gulf?

Sure. There are a lot of geologists working hard in the same area, and there no doubt will be other discoveries in the deep water. Will it change the direction [of the market? No. I don't think there is anything big enough to change the direction. You are dealing with declining curves around the world. What you can add helps, but the best additions come from Saudi Arabia because they are spending money and drilling a lot of wells.

Aren't you worried about being so dependent on Saudia Arabia?

I don't worry about anything, but I get concerned about things. The fact is we are dependent on the Mideast for about 25% of the total that we import. It's there, you have to deal with it, but I'm not going to worry about it. The biggest exporter of all to the U.S. is Canada, and when you look at the 8 or 10 countries that we buy oil from, there are only maybe two or three that are somewhat neutral to us. Others are not friendly. We have done a good job of lessening our dependency on our enemies. But our only real friend is Canada. That does concern me.

Won't advances in drilling technology continue to change the business?

It's much different today than 10 years ago, but you can't keep improving at the rate that we have been improving.

How do you make money in the oil market as an investor?

BP Capital, which was up 100% in 2005, has struggled this year, but we are still up 25%. I don't like companies that can't replace their production, and that takes me to the Canadian oil sands, and the company I said I would be in for the last five years is Suncor (SU ). We think it's a good time to buy oil, that it will hold at 65, and that the economy will grow 2%-2 1/2%, which will slow everything down. We are looking at next year to see what our plays will be.

Maria Bartiromo is the anchor of CNBC's Closing Bell

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