Abstract
Public opinion and the media often suggest that futures markets have made the price of oil more unstable than it otherwise would be. It is argued in this paper that one must distinguish short-term price instability, associated with the functioning of commodity futures markets, and medium term instability, associated with the processes that adjust production and consumption. Futures markets appear to be price destabilizing at times, though they also facilitate the management of trade in oil. But in the medium term, price stability and instability are determined by the mechanisms that adjust production and consumption.
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