Oil prices have stabilized at $40 per barrel, despite global oil demand remaining sharply below pre-pandemic levels. Everyone knows the significant role that OPEC+ has played in balancing the oil market, along with the sharp drop in production elsewhere, including in U.S. shale. But looking further out, another institution could play an even larger role in driving up oil prices: the U.S. Federal Reserve. Oil prices have historically moved in close concert with inflation. Recent examples include 2003-2008, which saw loose monetary policy, inflation and an incredible run up in crude oil prices. After the financial crisis, the Fed took extraordinary action to revive the collapsed economy – and crude prices shot up between 2009 and 2011. There are multiple links between Fed action and crude prices. The inputs – labor, land and raw materials – all increase in price with inflation. When those costs rise, that makes production […]