Two to (con)tango--will oil hit $200 within the next twelve months?
Background: 
In the summer of 2007, after oil prices reached $147 a barrel and gas was retailing for about $5 a gallon, there was an outcry for more alternatives, more refineries, more conservation, more infrastructure investment, etc. Every possible way to lessen our dependence on both foreign and domestic oil was on the table. Today, however, with crude trading for $38 a barrel or so, and gasoline in most locales below $2 a gallon, all the worry seems to have gone away, and everyone's fat and happy again. Right?
Er, no, actually.
According to many experts, while the global recession and credit crunch have severely impacted global demand for energy, it's only temporary. The problems propelling oil prices to $147 haven't gone away; the disease is, at best, in temporary remission. But aside from the recession (depression?) and credit squeeze, the other major factor determining the wild swings in oil prices over the past months is a not-sol-little thing called "contango".
Contango is the situation where--and the amount by which--the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery. For example, the April 2009 crude oil contract is around $38.10, while the April 2010 crude contract--that is, crude for delivery a year from now--is trading at $50.26. That's a $12.16 spread. That means the major oil companies can store crude on tankers and sell the April '10 contract at the higher price, and still make a hefty profit, as even with the cost of storage, they come out much better selling forward than at current prices.
So--given that A) economic recoveries always result in higher energy prices, B) energy demand is already exploding in quickly-growing areas like China and India, and will only multiple exponentially once the economy starts recovering, C) once the US economy gets rolling, our own demand will swiftly rise in lockstep, D) there's been no real progress on alternatives since oil prices plunged and the gloabl economy went south, E) OPEC has cut production across the board, F) the Cantrell oil field, Mexico's largest--is on the brink of running dry, G) so-called 'peak oil' may be soon upon us, and H) the effects of contango will become more prominently in-play, many experts are saying that $300-per-barrel oil may be as close as a year away (and no more than 3 years).
We'll not go that far; we just want to know whether you think that $200 per barrel oil will happen within one year from today, March 3, 2009. It could happen...or then again, perhaps those saying so could might just want you to buy into Big Oil right now to help them while things are still sputtering.
(And lest you think a price swing of $160 in just twelve months--about $13 per month--is impossible, remember that late last year, the price fell from $147 to $35 in just five months...a swing of about $22 per month.)
Special thanks to:
http://tinyurl.com/agqr3g
http://en.wikipedia.org/wiki/Contango
Will this soon cause even more pain?
In the summer of 2007, after oil prices reached $147 a barrel and gas was retailing for about $5 a gallon, there was an outcry for more alternatives, more refineries, more conservation, more infrastructure investment, etc. Every possible way to lessen our dependence on both foreign and domestic oil was on the table. Today, however, with crude trading for $38 a barrel or so, and gasoline in most locales below $2 a gallon, all the worry seems to have gone away, and everyone's fat and happy again. Right?
Er, no, actually.
According to many experts, while the global recession and credit crunch have severely impacted global demand for energy, it's only temporary. The problems propelling oil prices to $147 haven't gone away; the disease is, at best, in temporary remission. But aside from the recession (depression?) and credit squeeze, the other major factor determining the wild swings in oil prices over the past months is a not-sol-little thing called "contango".
Contango is the situation where--and the amount by which--the price of a commodity for future delivery is higher than the spot price, or a far future delivery price higher than a nearer future delivery. For example, the April 2009 crude oil contract is around $38.10, while the April 2010 crude contract--that is, crude for delivery a year from now--is trading at $50.26. That's a $12.16 spread. That means the major oil companies can store crude on tankers and sell the April '10 contract at the higher price, and still make a hefty profit, as even with the cost of storage, they come out much better selling forward than at current prices.
So--given that A) economic recoveries always result in higher energy prices, B) energy demand is already exploding in quickly-growing areas like China and India, and will only multiple exponentially once the economy starts recovering, C) once the US economy gets rolling, our own demand will swiftly rise in lockstep, D) there's been no real progress on alternatives since oil prices plunged and the gloabl economy went south, E) OPEC has cut production across the board, F) the Cantrell oil field, Mexico's largest--is on the brink of running dry, G) so-called 'peak oil' may be soon upon us, and H) the effects of contango will become more prominently in-play, many experts are saying that $300-per-barrel oil may be as close as a year away (and no more than 3 years).
We'll not go that far; we just want to know whether you think that $200 per barrel oil will happen within one year from today, March 3, 2009. It could happen...or then again, perhaps those saying so could might just want you to buy into Big Oil right now to help them while things are still sputtering.
(And lest you think a price swing of $160 in just twelve months--about $13 per month--is impossible, remember that late last year, the price fell from $147 to $35 in just five months...a swing of about $22 per month.)
Special thanks to:
http://tinyurl.com/agqr3g
http://en.wikipedia.org/wiki/Contango
Settlement details:As reported by a major mainstream news source.
Forecast history %
| Yes |
| ||||
| No |
|
Question suspends in 16 weeks
- Activity: H$71,329 |
- Predictions: 57 |
Comments: 0
Suspend date: Tue 2nd Mar 2010 11:59pm PST (16 weeks to go)
Initial likelihoods: Yes: 50%
Action history:
Changed Description Tue 3rd Mar 7:23am PST by 
sqlman![[Admin]](http://www.hubdub.com/images/icon_admin.gif "This user is an admin")
: show details
sqlman: show details ... ; text-align: center;">Will this soon cause even more pianpain?</div></div><br/> In the ... fat and happy again. Right? <?<br/> <br/> Er, no, actually. <.<br/> <br/> According to many ... -sol-little thing called "contango". <".<br/> <br/> <i>Contango</i> ... forward than at current prices. <.<br/> <br/> So--given that ... no more than 3 years). <).<br/> <br/> We'll not ... while things are still sputtering. <.<br/> <br/> (And lest you
Changed Description Tue 3rd Mar 7:26am PST by sqlman: show details
sqlman: show details ... of about $22 per month.).)<br/> <br/> Special thanks to:<br/> http://www.marketwatch.com/news/story/position-yourself-now-300-barrel/story.aspx?guid=%7B9C42CE1C%2DB7C8%2D4C22%2D8907%2D3A8D60BE1F0B%7D&dist=TNMostRead<br/> http://en.wikipedia.org/wiki/Contango
Suspend date: Tue 2nd Mar 2010 11:59pm PST (16 weeks to go) details 
Get widget!Predictions (57)
corbelle
predicted No (H$100 at 94%)
tuff_sledding![[Power User]](http://www.hubdub.com/images/icon_superuser.gif "This user is a super user"){kind=icon}
predicted No (H$4,000 at 93%)
vixen
predicted No (H$50 at 93%)
predicted No (H$50 at 91%)Comments (0)
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