It’s official: oil prices just surged to a new record.
Which makes it a good time to point out what a bad job the futures markets can do of predicting future prices—which, ostensibly, is what they’re supposed to do best. Take a look at the price trends for crude oil for December ’05 delivery over the past 6 years (graph courtesy of Futuresource.com):
Now, really, futures prices aren’t actually predictions of the future; they’re just a mechanism to help both buyers and sellers reduce risk, by locking in prices in advance.
Still, it’s worth noting that much of the time, people who look to the futures markets to predict the future are playing a sucker’s game.