Crude Oil Prices May Fall with Stocks, Gold on Measured Fed Stance
Oil prices could fall as the Fed stance remains stable. Oil could fall again if a stronger dollar and stronger domestic demand push the price of oil down further.
The Fed stance is not that strong as it was during the period of time it was choosing and re-chose its leaders. It may not be strong enough to push the price of oil too low.
Of course, if the dollar rises in value, the price of oil could increase. In this case, the U.S. oil imports could increase because of a weaker dollar. The demand for oil could also increase because of these higher oil prices.
In some ways, the Fed stance is still neutral as it has not changed since it was chosen by President Obama and former Federal Reserve Chairman Ben Bernanke. Of course, a change in Fed policy will cause major financial markets to react, but the weak U.S. dollar and increased demand for oil will help to keep the economy from over-heating.
In terms of the oil price, some might argue that the strength of the dollar is a cause for the Fed to maintain a weak hawks stance. But, while many governments and central banks are concerned about the economic decline, they have no choice but to maintain their commitment to maintaining the status quo. It is a matter of survival at this point in time.
With oil prices falling and a stronger dollar, there will be less demand for the goods and services that the U.S. has been exporting due to lower costs. And, since many goods and services are manufactured overseas, more money will flow into the U.S. than flow out.
That means that the hawk’s stance will remain where it is. As oil prices are falling, the Federal Reserve will only be buying bonds to offset the weakening dollar and maintain the status quo.
While this can help the economy, the hawk’s stance will not be strong enough to push the price of oil down further. Thus, the consumer price index may rise or the Fed could announce another round of bond purchases.
If the Fed begins to buy more bonds and sees the dollar rise more, there will be even less demand for oil because of the hawk’s stance. The strength of the dollar is not strong enough to push the price of oil too low.
We also do not see the market reacting to any announcements by the Fed regarding the strength of the hawk’s stance. The Fed will simply continue on with its current monetary policy in an attempt to stabilize the economy and prevent inflation.
The hawks stance can only be called weak if the economy continues to decline as it is right now. If the dollar continues to weaken, the government and central banks will be forced to maintain the current level of strength in order to keep the dollar strong and preserve the status quo.
The hawks stance has to be maintained to save the status quo if the nation continues to go downhill. The status quo would then be able to maintain the price of oil and maintain the flow of money into the country and the major corporations that do business in the country.