By Michael Tamvakis
What impacts the provision of oil? How vital is the elements in choosing grain costs? Why has the cost of copper skyrocketed?
This distinct book analyses the economics of key commodity teams, together with strength, agriculture and metals. It examines the supply/demand basics of numerous significant and minor commodities, actual features, creation and intake styles, exchange flows and pricing mechanisms. It additionally explains the major instruments used to hedge rate danger, equivalent to futures, recommendations and swaps.
This moment version comprise has been absolutely revised and restructured, and comprises four new chapters, together with oil refining, electrical energy and cost threat administration for strength, metals and agricultural commodities
This publication is an integral reference textual content for college students, lecturers and people operating within the commodity business.
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Extra resources for Commodity trade and finance
I do not attempt to answer this question, as it is beyond the scope of this text, but the interested reader is directed to Solow (1974a), Hartwick (1977) and Solow (1986). For a broader discussion on how the discussion of exhaustible resource allocation by the previous authors fits in the context of political philosophy, a good starting point is Rawls (1999). Returning now to a more microeconomic context, basic economic theory anticipates that each additional unit (the ‘marginal’ unit) of a natural resource will be extracted as long as the economic cost of extraction – which includes marginal cost2 and user cost3 – is lower or equal to the price4 paid for the resource plus the marginal utility5 of present consumption.
This is then a good point to mention the first law of thermodynamics, which has to do with energy conservation. This states that the energy in an isolated system is constant. Energy can be transformed from one form to another but cannot be created or destroyed. This leads on to the second law of thermodynamics, that of entropy. e. how much of the energy that is transformed can be channelled to useful applications, rather than waste heat). For example, the amount of kinetic energy that can be created from the chemical reaction of burning a fuel determines how efficient a car engine is – this is most commonly expressed in terms of mileage per gallon or litres per 100 kilometres.
For the same reason, the barrel/tonne equivalence for oil products also varies according to the specific gravity of the products. Lighter products, such as gasoline, have more barrels to the metric ton, when compared to heavier products, such as fuel oil. 2 records some of these conversions. Finally, the importance of oil as a source of primary energy has meant that agents both within and outside the industry are very interested in measuring overall energy metrics (in particular, consumption) using a common base.