Thursday, May 19, 2011

Oil Price Swings as a Dollar Hedge Pose a New Threat to Our Fiscal Future

Amplify’d from www.huffingtonpost.com

The linkage between monetary policy and oil prices raises questions for how a consistent domestic energy policy can be implemented if critical energy market price signals are distorted by linkages with monetary policy. Federal energy policies are presumably designed to spur investment into energy development--oil, gas and alternatives--but the such investments rely on the reliability of market pricing as an indicator of supply and demand equilibrium. If oil pricing increasingly reflects non-supply and demand factors, and is in part influenced by Federal Reserve policies and actions, there are significant ramifications for our energy policies.

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