Oil and the effect on the economy.

It is not a basic question at all. It is extremely complex. Of couse, most of the people could give you some vague idea about crude future price and economy. The devil is in details.

Basics: cheap dollar is good for crude price. Rising crude price helps the currency of oil exporting currencies. RIsing oil price could mean higher inflation. All statement are assuming everything else been equal. In reality, they never are. The dynamics is extremely comlex, endless game theory.

Fed will not rise interest rate to fight rising oil price. Fed mentioned numerous times, they focus on core inflation (does not include food and energy) rather than headline inflation. However, higher interest rate usually means higher cost of finance for everyone which slows the demand for credit and hence demand for real goods and therefore demand for oil, results negative impact on oil price, higher interest rate also mean stronger dollar, negative for oil price.

The above is just a tip of the iceberg about future prices. Physical market is even more complex and not transparent to outsiders. There are many grades of different crude. One also can say something about crude price in relation to its products, heating oil, motor gas, refinery margin, storage capcity etc. Since at. The end of day consumers use the end products, not crude....

Do you own research.

the dollar and commodities are inversely related because the commodities are priced in dollars. any general weakness in the dollar would mean that in real terms, the amount of commodities you could get with a given amount of foreign currency would go up. but this has nothing to do with the underlying supply vs. demand of commodities, so it would make sense that the price of the commodities would go up in dollars, to keep everything stable for foreign buyers. at least thats the theory. a weak dollar could also mean that inflation is expected. this could lead people to buy 'real' assets such as commodities as an investment in order to preserve their buying power.

Whether oil rising causes inflation/deflation depends ultimately on whether sellers think that they can raise prices, and if they actually can, without pricing themselves out of their markets. in other words, since oil is an input cost, if that goes up, will sellers raise their prices to preserve their margins, or will they take the hit in the margins? in the 1970's the world was in reasonably good shape, so when oil prices rose, everyone raised prices, figuring consumers would be able to tolerate price increases, and thus raising prices wouldn't the number of units they could sell. so in that case a spike in oil was inflationary, as all price just went up. now, however, consumers are in bad shape, since incomes haven't really been rising much and there is still too much debt, the thinking is that consumers won't be able to handle price increases, so they would just switch to competitors products if prices were raised by some firm. thus, prices won't rise, but there will be less money floating around chasing goods and services besides oil, since higher oil means more money spent on oil imported from other countries, this might actually have a deflationary effect.

higher interest rates would have little effect on the actual price of oil. But if interest rates were hiked, this would increase the odds that the economy would slow. this would in turn hopefully give sellers a dimmer view of their future pricing power, and make buyers more risk averse, leading to lower prices and less money chasing goods and thus lower levels of inflation. thus, interest rates could hypothetically be used to prevent oil price increases from creeping too much into food and core inflation.

im not an expert on any of this stuff, so feel free to correct me if im wrong

Oil = king of all commodities. Not just used for fuel, but for materials, fertilizers, pharmaceuticals, industrial chemicals, etc. Think about the prices going up for all those all at once.

Next FOMC meeting March 15, is there a likelyhood of rising interest rates? If so does that immediately convert into lower crude prices? Why?