Backwardation and Normal Backwardation in Energy Futures Markets: With an Application to Metallgesellschaft's Short-Dated Rollover Hedging of Long-Term Contracts

We show that, since the inception of energy futures markets, prices have on average exhibited backwardation. Normal backwardation has also been the norm, but, because of the low power of the standard tests, most researchers have concluded that the unbiased expectations model cannot be rejected. The fact that backwardation has been and (though somewhat more weakly) continues to be prevalent makes MGRM?s strategy of hedging long-term supply …