I believe the American economy’s fate near term will be mainly determined by the Saudi-Russian power play in the making. If Saudi Arabia drifts out of America’s orbit, our ability to avoid financial collapse will be difficult if not impossible.
Low oil prices have indeed kept inflation today down, allowing the Fed to continue stalling on a normalization of U.S. interest rates. A rise in oil prices likely would result in increased inflation. This would remove a crucial public excuse, enabling the Fed to justify zero interest rates.
I have been arguing for many years now that the Fed will not normalize interest rates, other than a possible token 0.25 percent, until forced to do so by market forces. I think those market forces are already in play and will be more so with a Russian – Saudi close collaboration on oil prices.