ENERGY MATTERS: Dec ‘08 Crude Tells The Tale Of Mkt’s Surge

NEW YORK (Dow Jones)–If there were such a thing an oil futures market archeologist, the December 2008 Nymex crude contract would be the perfect specimen to study to retrace the seismic shift in oil markets.

Etched in each trade since the contract debuted Nov. 20, 2001 – shortly after the terror attacks on the U.S. – is the story of dizzying generational changes shrunk into just a trim seven years. With six months still to go before its expiration in November, the contract also has set a mind-boggling milestone, that is unnerving to think may be broken.


December 2008 delivery crude hit a life-of-contract low of $19.75 a barrel on Feb. 26, 2002, $1.66 a barrel below the front-month contract that day, which ended at $21.41 a barrel. On Thursday, it hit a life-of-contract high of $136.25 a barrel, nearly seven times the record low, ending just 27c below the spot month contract. Already the contract smashed records, with a $116.25 a barrel span.

When the contract hit its record low, Saddam Hussein was still ruling in Iraq and Democratic presidential candidate Barack Obama was still in the Illinois state senate. U.S. gasoline pump prices, now above $4 a gallon in seven states, averaged $1.45 a gallon then. Peak oil referred to ambitious future pump rates, not the belief that key world oil fields are in fast decline.

Turning back to that price low and comparing prevailing data show a clear timeline of how we got there from here. Each thread of the tapestry speaks to the notion that it isn’t a single issue – weak dollar, speculators – that fueled the change. The complexity of the changes underscores the now-echoing cliches of a lack of magic wands, silver bullets or other quick fixes.

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