Schweser says that:

A significant decline in oil prices will lead to overheated economy and high inflation? How is that possible when lower oil prices is deflationary in nature?


When oil’s cheap people buy new cars, and borrow money to do so. Increased demand is inflationary.

in the long run, yes

The theory is that there will be more income available to spend on items which increases demand/prices of the rest of the economy.

It’s a pretty faulty idea IMO.

I’d agree in the LR, and i agree it’s a misleading statement