Is the Federal Reserve about to wreak havoc on crude oil prices?

Oil prices are already rising this week, to $90 per barrel on July 18, as the U.S. Energy Information Administration reports that demand for oil in the U.S. has risen for the third week in a row. Breaking the $90 barrier is a breakthrough of sorts -- it’s the highest level oil prices have seen since May 30, 2012.

Oil prices would likely climb further if the Federal Reserve opted to further stimulate the economy with a third round of quantitative easing (QE3)-- even though the Fed has revealed scant clues on what steps it may take -- if any -- on the economy.

Federal Reserve
Vice Chairman Janet Yellen offered a hint about the Fed’s strategic direction last week, commenting that the "scope remains for the FOMC to provide further policy accommodation…It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest."

Analysts and experts outside the Fed think QE3 is already a done deal.

Peter Schiff , a noted economic pessimist (or realist, as some say) appeared on Yahoo’s “Breakout” podcast on July 18, and said that QE3 is a “foregone conclusion”, even though he considers it a big mistake.

It would be better if Federal Reserve Chairman Ben Bernanke “'fessed up, and leveled with the American public and tell them what needs to be done,” Schiff said.

In another appearance on “Breakout” on July 12, one Wall Street trader believes that another round of fiscal stimulus is coming, and that oil prices will “skyrocket” as a result.

Kevin Craney
, a senior broker at Chicago-based RJO Futures , says that most pieces of economic data should trigger a decline in oil prices, but the reason that crude oil prices are rising is the prospect of QE3 coming down the pike from Washington, D.C.

“Crude oil prices are making everyone really nervous,” he says. “You have the Asian economy slowing, and the troubles in Europe have really sent a shiver up the spine of investors.”

“In the back of everyone’s mind is what is going on over in Iran. Iraq is producing more oil than Iran on a monthly basis. But the U.S. is not in a recession, although we are flat on our back. There is