Equalisation of the rate of profit made easy=or is fictitious capital formation weighing more heavily against the equalisation of the rate of profit? I think there is no escaping the former condition. Because in oil market for inst., the important fact is that the reference prices of oil those of WTI and Brent on which the pricing of all types of crude in international trade is either directly or indirectly based are determined in futures markets. Or, to be more precise, in a constellation of futures, spot, physical forward and derivative markets where, because of much greater liquidity, the
A factor which may have strengthened the move to higher prices relates to perceived differential rates of return from investment in different markets. Financial institutions, hedge funds and even some locals do not participate exclusively in oil markets. Most of them are participants in an array of financial markets (bonds, equities, foreign exchange, different primary commodities). They move funds between these markets in response to their views about possible differences in returns. The belief that the oil market may exhibit more tightness in the next few months which is indeed a belief that prices are likely to rise makes the oil market more attractive than, say, equities or bonds. Funds move to oil and seek to buy futures contracts. The rise in demand for these contracts naturally causes prices to rise by more than they would if there were less liquidity available. There are, therefore,
second-order factors which magnify the impact of fundamental causes on prices.
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