From Citi via FTAlphaville:
The access to cheap financing that low rates and QE generated has been deflationary in two key ways: 1) the growth of shale and the sanctioning of very high breakeven projects that cheap financing made possible has glutted the markets with oil; and 2) the rampant growth of shale, which is located in the middle of the cost curve and has significantly shorter lead times for first oil versus conventional production, acts as a buffer against price rises. Furthermore, given how much of the EM growth story of the previous decade has been driven by the rise of commodity exporters, the negative growth shock from lower commodity prices is compounding the first order deflationary impact in the US and Europe.
…Global food price inflation has also been on a structural downtrend over the last six to eight quarters alongside sharp declines in grain and agriculture prices as supplies and inventories recovered in the wake of the 2012 drought. In the past year, these disinflationary effects have deepened as oversupply and productivity gains in global ags markets persisted while the stronger US dollar and the energy-led commodity rout weighed on the asset class more broadly. Lower energy costs have also buffered producer margins upstream amid weak cash prices while curbing some key pockets of demand growth downstream such as for biofuel feedstock. Both directly through lower fuel (i.e. diesel) prices, and via energy-intensive inputs such as fertilizers and chemicals, cheap energy is slowing or even cutting the growth rate of farming production costs for corn, soybeans and wheat.