A $2 Trillion IPO & the Space Economy
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What are the current trends in the oil markets?
Oil continues to climb, but is there any relief in sight? Motley Fool Money starts now.
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From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Travis Hoyum, joined today by Lou Whiteman and Dan Kaplinger. And guys, we're going to get to space. Space is going to be a big topic here today, but we do want to start with the oil markets. This is kind of the thing that everybody in the market is thinking about, if not talking about. And Dan, I wanted to get your thoughts on what's going on, because oil is not... your typical market. It's a physical product. It's traded years out in the futures contracts. We have this Strait of Hormuz that is more or less closed. 20% of the oil in the world goes through that Strait. What are we seeing in oil markets? Because it seems like prices are up.
How is SpaceX planning for a $2 trillion IPO?
We're at about $110 per barrel for both West Texas Intermediate and also Brent Crude right now. But it seems like people in the oil industry continue to be worried that things are going to get much worse, but they're not yet. So what's the real story here?
It's interesting because there are so many different perspectives to look at this from. From the perspective of the American consumer, things look pretty bad. Gas prices where I live were around $2.80 a gallon in December. They're up about $1 per gallon, up around $3.80. I think that Regardless of what the actual level is, that dollar increase is pretty consistent across the country. It's interesting because a lot of folks have suggested that the U.S. is insulated from the impact of this because we don't necessarily depend directly on Persian Gulf oil. But when you look at some of the other countries that do depend more on Persian Gulf oil, they have not even seen the percentage price increases we have.
Korea was up about 15%. Japan's up in the 15% to 20% area. We're up closer to 30% to 35%. It's interesting how the macroeconomics are playing out here. The other thing, and this threatens to get a little bit wonky about futures markets and things like that.
No, let's get wonky. This is what I want to explain. You could spend your whole life just studying what the futures markets are.
What does the future of the space economy look like?
There was an entire class that I took in grad school doing the formulas of how you price things like oil. It's fascinating. It's a big reason that things are not higher than they currently are.
So, oil futures are in an unusual situation right now, just for those who aren't familiar with this. You can buy oil at a specific price at a specific point in time in the future. And the prices will be different depending on when you want it. If you want it at a high demand time, the price is going to be higher. If you want it at a lower demand time, the price is going to be lower. Right now, we have this huge disparity. Front month, the current month, if you want oil right now, $110 a barrel. If you are willing to wait until the end of 2026, much lower, $40 a barrel lower, still $70 oil futures a year and a half out, they're only up $10 a barrel. Prices of the front month are up like $50 a barrel.
What this is telling folks, this is a situation that's called backwardation in the futures markets. What this is telling people is that at least the financial folks trading these futures don't think that oil supply is going to be a problem for very long. They think that something's going to happen, supply is going to get restored, and prices are going to go back at least pretty close to where they were before all of this started, which is a little bit surprising because we've got some folks saying things like, well, the infrastructure is all messed up and it's going to take a long time for everything to get back to normal. There's a disconnect between what these futures markets are saying and what you're hearing a lot of experts talking about as far as the physical production and movement of oil across the global market.
I mean, just to underline that, the oil futures market does a lot of things.
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Chapters
8 chapters
1
What are the current trends in the oil markets?
0:05–1:18
2
How is SpaceX planning for a $2 trillion IPO?
1:18–2:50
3
What does the future of the space economy look like?
2:50–5:31
4
How are rising oil prices impacting the economy?
5:31–7:59
5
What stocks are included in our mini-portfolio?
7:59–10:06
6
What investment opportunities are currently on our radar?
10:06–12:40
7
How does the market perceive the potential of SpaceX?
12:40–16:00
8
What factors should investors consider in the current market?
16:00–39:39