Suppose speculators expect that the supply of oil will decrease next year and as a result, buy up oil today and put it into storage. This should cause the value of that oil to:
A) increase.
B) decrease.
C) either increase or decrease.
D) remain unchanged.

Question

Quizplus · Accepted Answer

When speculators buy up oil today and put it into storage, the current demand for oil increases but the supply remains the same. This creates a shortage in the market which causes the value of the oil to increase. Therefore, speculators buying up oil today and putting it into storage would cause the value of that oil to increase.

Suppose Speculators Expect That the Supply of Oil Will Decrease