The Dynamics of Commodity Spot and Futures Markets: A Primer

Robert Pindyck

The Energy Journal, 2001, vol. 22, issue 3, 1-29

Abstract: I discuss the short-run dynamics of commodity prices, production, ami inventories, as well as the sources and effects of market volatility. I explain how prices, rates of production, and inventory levels are interrelated, and are determined via equilibrium in two interconnected markets: a cash market for spot purchases and sales of the commodity, and a market for storage. I show how equilibrium in these markets affects and is affected by changes in the level of price volatility. I also explain the role and behavior of commodity futures markets, and the relationship between spot prices, futures prices, and inventory behavior. I illustrate these ideas with data for the petroleum complex - crude oil, heating oil, and gasoline - over the past two decades.

Keywords: Commodity prices; Futures Markets; inventories; volatility; crude oil; gasoline (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (3)

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Journal Article: The Dynamics of Commodity Spot and Futures Markets: A Primer (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:22:y:2001:i:3:p:1-29

DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No3-1

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