Well, Cushing is in the nation's midsection. It's where a lot of corn is grown, and where ethanol as fuel is a natural market. According to Verleger's analysis, an increasing amount of auto miles, to meet the standard, will need to be driven by electric vehicles, natural gas vehicles...and flex fuel vehicles, those that can consume E85, which is 85% ethanol.

"The US Midwest, home to Cushing and the Bakken oil finds, just happens to be the nation's leading advocate of renewable fuel use," Verleger says in his report. "This region will probably become the default ethanol consumer, that is, the area with higher flex-fuel vehicle sales and the largest disparity between E85 and conventional gasoline prices."

The result: "By 2015, we expect the Midwest to receive more petroleum than it consumes," because what is now gasoline consumption would be displaced by other motor fuels. That Midwest imbalance would be a significant reversal of historic trends, Verleger notes.

That sets the market up for a major contango play, according to Verleger. There will be more storage at Cushing, more crude out of the Bakken and oil sands, and PADD II demand displaced by E85 or other alternative fuels, like natural gas. "The surplus will likely embolden some refiners and traders to keep Cushing inventories as high as possible," Verleger writes. He doesn't go into the reasons for that, but they are presumably some of the existing trends that have benefited Midwest refiners (depressed prices at Cushing, but product prices tied to global product markets) and traders (buy prompt oil, sell it forward into the contango and store it in Cushing for the duration...easy profits.) That will widen the contango in the WTI market, and "drive spot prices down," Verleger writes.

Eoin Treacy's view The spread between Brent Crude and West Texas Intermediate continues to expand and is currently near $23. This condition has been exaggerated both by the excess supply situation at the Cushing terminal in the USA as well as tightness in Brent supply.

The spread between the 1st and 2nd month continuation charts for Brent crude shows large spikes around contract rolls over the last three months. This type of activity is consistent with traders anticipating when tracker funds roll their positions forward. It exemplifies the high degree of speculative interest in this commodity which may also be affecting the spread between Brent and WTI. .

The USA's energy landscape is changing rapidly as technological innovation allows new reserves of oil and gas to be exploited. Flex fuel cars which run on gasoline, ethanol or natural gas are already commonplace in Brazil and are likely to become a much more viable option elsewhere as high fuel prices have an impact on consumer behaviour. US leadership in unconventional oil and gas production is unquestioned and demand from other countries for access to this technology is also likely to have a marked effect on the energy landscape elsewhere over the coming decades.