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For physical commodities, financial cost will eventually converges to physical cost as the contracts reach settlements. If not, those financial contracts will b
by littletitans 11y ago
For physical commodities, financial cost will eventually converges to physical cost as the contracts reach settlements. If not, those financial contracts will be replaced; by another product that can truly provides physical players to hedge their risks.
- Gibbon1 11y agoI'm coming down on the side that oil's long term value is almost wholly based on potential substitution costs and it's current role in the economy. Meaning the value of money and oil are strongly linked. If the price of oil spikes for too long you get a recession and demand falls and the price of oil falls with it. And you can get price spikes/crashes because in the short term demand is inelastic. But long term, it isn't going up forever. But price spike/crash is something to pay attention too, in any field. Absent graft no one make bank on anything for too long.