I think oil is showing some signs of forming a bottom after falling to $92 from $107 but with the US dollar, commodities tumbling and US oil production exploding, there is the chance of a much bigger fall in oil.
I was reading some old Fed transcripts and here’s what Bernanke had to say about oil in 2006.
Oil prices continue to decline, which obviously is good for both growth and inflation. I thought you might be interested in thinking about the quantity effects of the decline in oil prices. We’ve had a decline in oil prices of about $15, which back-of-the-envelope calculations or FRB/US analysis can tell us should add about 0.45 percent to the level of real consumption or about 0.35 percent to the level of real GDP. Dave Reifschneider was very helpful in finding those numbers. That’s a change to the level, so the oil price declines could add 0.3 to 0.4 percentage point to growth, say, over the next six quarters.
WTI crude oil
