That, in turn, pushes up the price of Dollar-denominated commodities such as crude oil, soy beans and Gold.

So far, the Fed's aggressive rate cuts haven't found any meaningful traction in the S&P Banking Index, which is still languishing at its March lows, some 40 per cent lower from a year ago.

Banks continue to post hundreds of billions in losses from toxic sub-prime mortgage debt. But the Fed's single focus on rescuing the banking sector, with no regard for the inflationary consequences of its actions, has led to the emergence of the "crude oil vigilantes".

Much like the famed "bond market vigilantes" of the late '70s and early '80s - who sold US Treasuries hard, pushing up bond yields and forcing the Fed to raise its interest rates - these traders are now punishing central bankers who have too abusive with the world's money supply. The crude oil vigilantes merely swap bonds for oil prices.

In the past, a sharp slowdown in the US economy, the world's biggest oil guzzler, usually pushed the price of crude oil and other commodities lower. But the Fed was caught by complete surprise after crude oil prices doubled, even as America's economy slipped into a recession in the first quarter.

"The current oil price has no relation to market fundamentals," explained Saudi oil chief Ali al-Naimi on March 5th. "It is linked to tremendous speculation in crude oil futures. There are even those who buy futures and speculate that oil prices will reach $200 in 2013."

On April 28th, Opec chief Chakib Khelil observed that crude oil prices were climbing "even though supply is adequate, because the market is driven by the dollar's slide. Each time the Dollar falls 1 per cent, the price of the barrel rises by $4, and of course vice versa.

"If for instance, the US Dollar would strengthen by 10 per cent, it is probable that oil prices will fall by 40 per cent."

But such simple logic has its limitations. China, India, Russia and the Middle East combined are now consuming more crude oil than the United States, burning 20.7 million barrels a day – some 4% from than a year ago, according to the IEA.

The emerging economies are picking-up the slack in the oil market, more than offsetting the 1.3% contraction in US oil demand forecast this year to 20.3 million barrels per day. Thus a mild recession in the Western economies and Japan might not weaken global demand for oil.

Image: A motorcyclist pumps gasoline into his motorcycle at a Chevron station in San Francisco, California. | Photograph: Justin Sullivan/Getty Images