The price of oil crashed along with everything else during the financial crisis, but then managed a powerful comeback, despite excess inventories and lackluster demand in the developed world. Most of the rebound could be attributed to the Fed’s second round of quantitative easing, as in the six months after Ben Bernanke first hinted at QE2, oil prices rallied over 50%. At the time this was viewed as a success, since staving off deflation was one of the Bernanke Fed’s main goals.
But it was that same environment created by the easy money that led to the spectacular decline in oil prices over the past 18 months.
(Read the rest of this column here)