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Commentary
The current oil and commodity price shock has created an interesting pattern: The futures curve has moved further into backwardation, and market participants are shrugging off the headlines, discounting a short-term inflationary burst that would be rapidly corrected.
We should expect disinflationary pressures to dominate after the current energy shock, rather than a prolonged inflation crisis. The combination of a backwardated oil curve, contracting money supply, weak money velocity, and a strong U.S. dollar argues for lower—not higher—trend inflation once the temporary impact of higher crude prices fades.
Recent geopolitical tensions have pushed crude above $100 dollars per barrel (Brent), reviving fears of a new inflation wave. However, the structure of the oil market shows that this is being priced as a short‑lived supply disruption, driven by a geopolitical risk and scarcity premium in the front-end, not a persistent shock….
The current oil and commodity price shock has created an interesting pattern: The futures curve has moved further into backwardation, and market participants are shrugging off the headlines, discounting a short-term inflationary burst that would be rapidly corrected.
We should expect disinflationary pressures to dominate after the current energy shock, rather than a prolonged inflation crisis. The combination of a backwardated oil curve, contracting money supply, weak money velocity, and a strong U.S. dollar argues for lower—not higher—trend inflation once the temporary impact of higher crude prices fades.
Recent geopolitical tensions have pushed crude above $100 dollars per barrel (Brent), reviving fears of a new inflation wave. However, the structure of the oil market shows that this is being priced as a short‑lived supply disruption, driven by a geopolitical risk and scarcity premium in the front-end, not a persistent shock….
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