Risk and Return Characteristics of Commodities

Investing in commodities can offer diversification benefits and potential hedges against inflation for investors. However, it is important to understand the risks and returns associated with commodity investments. One key aspect of commodity investments is their expected performance determined by various market factors.

Consider an investment in crude oil as a commodity. The investor believes that due to geopolitical tensions, there may be a significant increase in oil prices. This scenario reflects the general relationship between supply, demand, and external economic factors.

Which of the following statements best describes the characteristics of risk and return associated with commodities like crude oil?