Storage And Commodity Markets PDF Download

For most of the 20th century commodity prices fell in real terms. Prices of metals, energy and food became so low that they were almost irrelevant to developed world consumers. Since 2003 prices have risen sharply, and have become so high they have been blamed for recessions, civil unrest and even revolutions. Although increased speculation in commodity markets has probably played a role, the fundamental factors of supply and demand continue to form the most important determinant of commodity prices. Price rises have been caused by 'scarcity' caused by rapid demand growth from newly affluent consumers in the developing world, meeting a supply that has struggled to respond. Understanding current and future scarcity in commodities therefore helps us predict and warn of further price spikes. This thesis studies all three major commodity groups, examining existing ways to measure scarcity and proposing new ones. Firstly we study the base (industrial) metals. We examine the 'theory of storage', which explains price and price volatility in terms of the quantity stored in inventory, a key measure of scarcity. Secondly we study energy markets. Electricity cannot be stored, so the 'theory of storage' cannot be applied. We note an alternative measure of scarcity which allows us to apply a modified theory of storage to electricity. We also examine its applicability to another key energy commodity, crude oil. Finally we examine scarcity in the agricultural products. Here we have inventory data, providing short-term scarcity information, but unlike for energy and metals, we have no concept of reserves, being that resource known but remaining in the ground, which provides longer-term scarcity information. Instead, we propose and examine several other ways to measure scarcity.