The article displays a laughably out of date view of futures markets, too
There are people and institutions, such as oil producers, who will need to sell oil at a future date. They want to lock in the price today on those future sales. There are also people and institutions, such as airlines, who have a future need for oil and would like to lock in the price today.
Airlines haven’t hedged fuel in a long time and generally run a policy now of just adjusting fares whenever fuel prices change.
Oil producers sell futures simply to ensure deliver of their oil at a certain date so that someone actually shows up to pick it up.
The rest of the market is speculation, and in particular short term movements have always been very speculative and also believed to be plagued by insider trading. Airlines and oil producers do not care about minute to minute changes.
Southwest was famously killing it during the oil shocks of the 1990s and 2000s because they had the foresight to buy futures when spot prices were low. See https://southwest50.com/our-stories/the-southwest-jet-fuel-h... - I used to joke that Southwest was a futures trader disguised as an airline.
SWA was the last major airline to engage in strategic hedging, and came under considerable investor pressure to stop doing that (since it means they can’t lower fares as much when oil is cheap). So they stopped, and investors apparently don’t want airlines to be futures traders disguised as airlines. They prefer credit card referral marketing agencies disguised as airlines.
Now the airlines simply raise fares in lockstep when oil gets expensive, or simply go out of business, like Spirit did last week.
It doesn’t work that way. Canceling flights has significant business-impacting downstream effects that go beyond mitigating the loss caused by a bad bet.
Metals (miners <> manufacturers) and agricultural (farmers <> food makers) futures are still non-speculative. There are industries that still buy materials from these markets, for delivery, as in they want to see the physical product in their hands. I was surprised to find that out as well
The losses of market participants and the gains from insiders is difficult for me to take seriously as a problem in commodities market
I read all of the cases in the article