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May 2, 2008 3:58 AM Subscribe
How much of the recent runup in crude oil prices is due to the decline in the value of the dollar vs. other supply and demand factors? Virtually none of the news media seems to mention this explanation.
This post was deleted for the following reason: we pretty much did this two days ago -- jessamyn
There isn't a simple answer.
Oil trades in dollars and in dollars is up 75% or so since early 2006, but converted to euros is up only 40% and converted to yen and sterling is up 60%.
The main force in the depreciation of the dollar versus euro and (somewhat less severely) sterling and yen hasn't been supply and demand for oil but U.S. fiscal and monetary policy.
The main force in the appreciation of oil has been supply and emerging-market demand and not the macro and political factors which drive G8 politicians and central bankers.
However, a fear of further dollar depreciation has exerted been a consistent goad up in the dollar price for oil, alongside basic supply and demand issues. When (as in the last few days) the markets begin to be a little less afraid of further dollar depreciation, the price of oil tends to ease off, but still ride the basic fundamental supply and demand problems.
posted by MattD at 5:38 AM on May 2, 2008
Oil trades in dollars and in dollars is up 75% or so since early 2006, but converted to euros is up only 40% and converted to yen and sterling is up 60%.
The main force in the depreciation of the dollar versus euro and (somewhat less severely) sterling and yen hasn't been supply and demand for oil but U.S. fiscal and monetary policy.
The main force in the appreciation of oil has been supply and emerging-market demand and not the macro and political factors which drive G8 politicians and central bankers.
However, a fear of further dollar depreciation has exerted been a consistent goad up in the dollar price for oil, alongside basic supply and demand issues. When (as in the last few days) the markets begin to be a little less afraid of further dollar depreciation, the price of oil tends to ease off, but still ride the basic fundamental supply and demand problems.
posted by MattD at 5:38 AM on May 2, 2008
Weeellll...
The US Dollar Index is a trade-weighted index of the strength or weakness of the dollar, and it's dropped about 19% in the last two years.
NYMEX cash crude in dollar terms is up about 55% in the past two years.
So, as a very quick and dirty number, a bit less than half of the increase in the crude price over the past two years is due to the drop in the dollar. Give or take. Call it 40% and you wouldn't be too far off.
posted by The Shiny Thing at 5:47 AM on May 2, 2008
The US Dollar Index is a trade-weighted index of the strength or weakness of the dollar, and it's dropped about 19% in the last two years.
NYMEX cash crude in dollar terms is up about 55% in the past two years.
So, as a very quick and dirty number, a bit less than half of the increase in the crude price over the past two years is due to the drop in the dollar. Give or take. Call it 40% and you wouldn't be too far off.
posted by The Shiny Thing at 5:47 AM on May 2, 2008
This thread is closed to new comments.
posted by rdr at 4:19 AM on May 2, 2008