The Fed is the 'new arbiter of oil prices' as rate hikes weigh on economic activity, energy historian Daniel Yergin says

• The Federal Reserve is now "the central bank of oil," according to energy historian Daniel Yergin.
• Yergin told CNBC's Squawk Box that energy markets are at the behest of the Fed's rate hikes.

The Federal Reserve has become "the new arbiter of oil prices," according to energy historian Daniel Yergin, as the central bank's rate hikes add pressure to energy markets.

Yergin told CNBC's Squawk Box on Wednesday that the central bank's benchmark interest rate increases to combat inflation are "permeating the oil market as it is the stock market." Yergin added that demand is down sharply compared to the same period in 2021, further complicating the picture.

Yergin also commented on European proposals to cap energy prices, saying that such proposals are "inevitable" given the skyrocketing costs of energy that EU member countries are contending with.

"I think given the degree of economic hardship its inevitable, and you just hope that they do it in a soundproof way," Yergin said.

Yergin added that the war in Ukraine has put Europe in a position the continent has never been in before, while Russian President Vladimir Putin is "using gas to create economic hardship and political turmoil in Europe [and] he's going to continue to do that."