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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.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit clevelandfed.org for updates.

Suggested Citation

Haubrich, Joseph G., Patrick Higgins, and Janet Miller. 2004. “Oil Prices: Backward to the Future?” Federal Reserve Bank of Cleveland, Economic Commentary 12/1/2004.