How a Fed rate cut raises oil prices

from CNNMoney.com:
Expect even higher crude prices if the central bank cuts interest rates Wednesday.
By Steve Hargreaves, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- If you think oil prices are high now, wait till Wednesday.
That's when the Federal Reserve is set to announce its decision on interest rates. Most say a cut is coming.

"If the Fed cuts rates, it will probably push oil prices higher," said Adam Sieminski, chief energy economist at Deutsche Bank.

There are a couple of reasons lower interest rates usually cause higher oil prices. The first is lower interest rates are designed to spur economic growth by making money for investment cheaper to borrow. Stronger economic growth usually entails using more energy, so traders bid up oil prices on the expectation of higher demand.

Second, lower interest rates usually cause the dollar to fall, as they make dollar-denominated investments like Treasurys less attractive for foreign investors.

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