| In understanding the latest commodities selloff centered on oil, consider a raw material lurking in your kitchen: rice. Economists think stockpiling plays a big role in commodity bubbles, but are only now getting the evidence needed to understand exactly how it works. One implication of what they are learning: Prices haven’t bottomed yet.
A standard theory of how commodity bubbles form begins with an imbalance between supply and demand. This raises prices and prompts some stockpiling, due either to worries about having enough or hopes of selling for more in the future. This curbs supply further, pushing prices higher still. Cautionary stockpiling morphs into hoarding, and the bubble inflates...............................................Full Article: Source
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