This article was originally published in the Spring 2022 edition of The Magazine of International Economic Policy. You can read the full article here.

The words below appear in the second volume of John Maynard Keynes’ A Treatise on Money. Keynes, known for his macroeconomic writings, was a famous, successful com- modity economist and trader. In 1936, his long position in wheat amounted to a month’s worth of consumption for the United Kingdom, according to Reuters.

“If there is a shortage of supply capable of being remedied in six months but not at once, then the spot price can rise above the forward price, which is only limited by the unwillingness of the buyer to pay the higher spot price rather than postpone the date of his purchase.”

John Maynard Keynes, 1936

Keynes’s comment regarding supply shortages is evident today in the market for gasoil, also known as distillate, diesel fuel, or heating oil. It is also evident in jet fuel. The evidence can be seen in the market data. The figure on the next page shows the spread between cash distillate delivered in New York Harbor and the fifth futures contract for the fuel.

Read the full article here.

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