Template-Type: ReDIF-Article 1.0
Author-Name:  Robert S. Pindyck
Title:  The Dynamics of Commodity Spot and Futures Markets: A Primer
Classification-JEL: F0
Pages:  1-30
Volume:  Volume22
Issue:  Number 3
Year:  2001
Abstract:  I discuss the short-run dynamics of commodity prices, production, and 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.
Handle: RePEc:aen:journl:2001v22-03-a01
File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=1364
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