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Oil Prices: Backward to the Future?


A useful first guess about the future spot price of a commodity is usually found in its current futures price. But it doesn’t work that way when the commodity in question is oil. This Commentary explains why the characteristics of oil, particularly the value it can offer its owner by remaining in the ground, cloud the information that oil futures prices give about future oil prices.

A useful first guess about the future spot price of a commodity is usually found in its current futures price. But it doesn’t work that way when the commodity in question is oil. This Commentary explains why the characteristics of oil, particularly the value it can offer its owner by remaining in the ground, cloud the information that oil futures prices give about future oil prices.


Suggested citation: Haubrich, Joseph G., Patrick Higgins, and Janet Miller, 2004. "Oil Prices: Backward to the Future?" Federal Reserve Bank of Cleveland, Economic Commentary, 12.01.2004.

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