Scepticism About Commodity Futures Markets: An Answer

This paper argues that commodity futures markets and its participants have an essential economic role. As such, the task of this paper is to explain why this is the case. Specifically, given the re-emergence of controversies over commodities trading, including in the oil markets, this paper will provide a basic primer on the following topics: the role of futures prices in revealing fundamental information on commodity markets, especially in the crude oil markets; the short-term interaction effect between traders and price; the economic role of hedgers and speculators in the commodity futures markets; expected commodity price behavior during times of scarcity; and the empirical evidence on the role of the speculator.