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Oil Price Dynamics Explained By Quantitative Easing?

oilprice-2year

Why the rapid drop in oil prices?

Conventional explanations:

  • Saudi-Arabia increased oil production on orders of Washington to hurt Russia and Iran
  • Fracking boom in the US
  • Slowdown China
  • Demand destruction, like many people driving less and in smaller cars

Here is another explanation:

high oil prices were the result of FED policy of quantitative easing.

Now that the FED has announced it will stop that practice, oil prices are back to normal again.

Easy money had kept oil prices artificially high for much longer than fundamentals warranted, as Chinese demand and oil supply had started to turn back in 2011, and oil prices have now merely returned to their long-term average

Although we are not willing to accept this theory head over heels, it is interesting nevertheless. Especially the following quote from the article resonates:

Sharma rightly points out, though, that supply and demand haven’t changed enough to create a 50% plunge in prices.

[time.com] – The Real (and Troubling) Reason Behind Lower Oil Prices

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