Doesn't increasing interest rates reduce demand though? So they can't print more oil, but they can reduce the attractiveness of investments that will require oil, thus indirectly driving prices down?

https://www.rbc.com/en/economics/us-analysis/us-featured-ana...

https://www.cnbc.com/make-it/2026/03/06/e-shaped-economy-rep...

https://www.axios.com/2026/01/22/jobs-stock-market-rich-amer...

I didn't know this. I wonder if the concavity is symmetric between an increase and decrease in wealth...

In the US, the economy is passing increased money and energy costs to consumers. In China and other countries, they are rapidly electrifying light and heavy vehicles. Different responses to similar economic signals.

So maybe elastic or inelastic isn't a binary, but somewhat closer to a step function

Reducing our reliance on oil would be a very sensible response. Unfortunately, I don't think it is one our current government would consider.

Raising rates makes credit more expensive. That cools down growth. That, in turn, eases resource demand (as a function of the resource intensity of GDP).

Practically speaking, higher rates today would mean less borrowing to build datacenters. (And new homes, et cetera.) Which would mean those marginal resources going to other uses. Which would ease price pressure.

> there will be, for long into the future, more projects chasing a shrinking supply of capital

Capital is priced in rates. Too many projects chasing too little capital will drive rates up until the capital markets balance.

And current spreads indicate a surplus of capital [1]. That's why we're seeing e.g. multi-trillion dollar IPOs.

[1] https://www.macrotrends.net/3229/us-high-yield-bond-spread

This is only true if the cost of capital is a functional constraint. If the constraint is elsewhere (in this case: sourcing GPUs, bringing online energy resources) it will not have any significant effect.

When the expected return is very high because the captured resource is perceived to be monopolistic, this lever does practically nothing. Unless they raise it so much they destroy everything else.

Then there are not, by definition, "more projects chasing a shrinking supply of capital."

It can be true if it is a subset of “more projects”, if the decision mechanism works outside a market, or if that capital is accessible via mechanisms within the market which are not directly linked to borrowing rates, such as where the cost of capital was locked in years ago. Rates are not a panacea.

> This is supply-side inflation. You can still bring down inflation with rates by cooling demand. (Less free cash in the economy means less spending on AI means less demand for GPUs.) The downside is it costs you more output than in a balanced economy.

You said the same thing I said, just euphemistically. This is like saying you can rid your house of insects with a flamethrower.

Sure. Now do the next project that's going to lock itself in today.

> Rates are not a panacea

Nobody argued as much. Just that the effect has size and meaningful magnitude.

> You said the same thing I said, just euphemistically

No, I didn't. In an economy where private investment dominates consumption, you can reduce output and thus inflation without touching consumption, i.e. without impacting household budgets. You're giving up future jobs. But barring a large influx of new workers, something America doesn't have a problem with right now, unemployment will stay steady.