A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it. Examples are petroleum, cement or copper. The price of copper is universal, and fluctuates daily based on global supply and demand.

One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminium, copper, rice, wheat, gold, silver, palladium, platinum, cement, re-bars etc….


There is another important class of energy commodities which includes electricity, gas, coal and oil. Electricity has the particular characteristic that it is either impossible or uneconomical to store; hence, electricity must be consumed as soon as it is produced.

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