This is a basic chart for educational purposes. The arrows drawn are not predictions, merely possibilities.
There are two scenarios I see potentially playing out:
1. Deflationary crash. I don't think this is the most likely scenario. The Federal Reserve would have to continue with monetary tightening by allowing interest rates to rise and they'd have to be very slow in responding to a recession (like 2008). If this does happen, I see us following the red arrow. With the economy slowing down as it is, this isn't outside the realm of possibility, a big slowdown would have to take place and surprise most people.
2. Inflationary pressures spark higher OIL. Inflation is supposedly "low". If interest rates go lower, Quantitative Easing makes a comeback, and the budget deficit increases (normal during a recession), then there is no way inflation remains "low". 2% per year inflation could very easily and very quickly be exceeded. These inflationary pressures will be good for oil.
There are two scenarios I see potentially playing out:
1. Deflationary crash. I don't think this is the most likely scenario. The Federal Reserve would have to continue with monetary tightening by allowing interest rates to rise and they'd have to be very slow in responding to a recession (like 2008). If this does happen, I see us following the red arrow. With the economy slowing down as it is, this isn't outside the realm of possibility, a big slowdown would have to take place and surprise most people.
2. Inflationary pressures spark higher OIL. Inflation is supposedly "low". If interest rates go lower, Quantitative Easing makes a comeback, and the budget deficit increases (normal during a recession), then there is no way inflation remains "low". 2% per year inflation could very easily and very quickly be exceeded. These inflationary pressures will be good for oil.