[chrisser]

Higher inventory means higher prices, because there is a holding cost associated with that inventory.

When you're dealing in a commodity with high cost variability, the holding cost is frequently a mere fraction of the cost fluctuation.

Additionally, as is often the case with a commodity, the volume of product sold is quite large and thus the holding cost per unit is correspondingly small.

Correspondingly, with high volume, the margin per unit is often also very small.

Those factors (among others) combine and result in the fluctuations in cost becoming the overriding factor in business decisions because they far eclipse everything else.

[Barney Gumble]

Due to the large volume being sold, the amount of inventory needed to help smooth out the highs and lows, is astronomical. Price fluctuations will end up causing higher prices, but holding more inventory isn’t the answer.