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Epperson's Scorecard: 2012

Tuesday, 4 Dec 2012 | 11:45 AM ET

OVERALL GRADE: C

Looking back at my predictions for commodities in 2012, I didn't fare very well by my Ivy League standards. I'd give myself a C grade. But then again, C stands for commodities, the direction of which is rarely certain when there are so many underlying factors driving the prices of these assets. Here is what I forecast a year ago:

Gold will top $2,400 an ounce: C-

Gold made a march toward $2,000 twice this year, but failed around the $1,800 level. Global risk aversion and unprecedented uncertainty didn't boost the metal's safe-haven appeal as I had expected. But that doesn't mean it won't top $2,000 an ounce next year. Fiscal problems in Europe and the United States are still far from being solved and that will continue to prompt central banks to buy gold against their country's devalued currencies. This puts gold in play as a traditional "safe haven" and "risk on" trade.

The Brent-WTI spread falls toward historical levels: B-

I said the spread between the global benchmark Brent crude contract and U.S. oil prices, represented by the West Texas Intermediate contract, would approach more historical norms in the $3 to $10 range in 2012. Well, the spread traded under $10 in the first month of the year, but didn't stay that low for long. The spread widened for most of the year, reaching a high of $26 a barrel in October. But in the second half of the year, the normal fall maintenance programs in the North Sea took longer than many traders and analysts expected. Tight supplies coupled with increasing Mideast tensions has lifted the Brent crude price. Meanwhile U.S. oil production has been booming, currently at its highest level in more than 15 years, which has kept the WTI price under pressure.

Retail gasoline prices rise above $4 a gallon: A-

A year ago, I said refinery shut-downs along the East Coast would help drive up pump prices toward their 2008 all-time high above the $4 mark. I got it right - at least for parts of the country. A new record was set for retail gasoline prices in California. Refinery issues and the slow switch from summer- to winter-grade gasoline created a shortage of supplies in the state, causing the California's average gasoline price to spike to a new record—$4.67 a gallon—in October. Prices also topped $4 in New York in October and November thanks to tight supplies and refinery outages and distribution issues due to Superstorm Sandy. But the supply situation has been much better in some Midwestern and southern states, where prices have fallen to $3 or less. The national average for retail gasoline hit $3.94 a gallon in April on worries about the refinery closures in the Philadelphia area and preparation for the summer driving season, but have fallen more than 50 cents since then as some unexpected deals have kept refineries going and production in the midcontinent is robust.

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