Technology with attitude

Yes, High Oil Prices Are Directly Related To Weak Dollar


This is one of those things that should be obvious, but it takes a guy from OPEC to state it outright that we can actually have a say in how much we pay for oil.

From NY Times:

ALGIERS (Reuters) – OPEC President Chakib Khelil does not rule out oil prices reaching $200 a barrel, even though supply is adequate, because the market is driven by the dollar’s slide, Algerian government newspaper El Moudjahid reported on Monday.

“Questioned about a possible rise which would go to $200, the minister did not rule out this eventuality, explaining that this rise is indexed from now on to the fall in the dollar or to the rise in the dollar,” El Moudjahid reported.

“In terms of fundamentals, stocks are high, demand is easing, supply is satisfactory. Therefore normally, without geo-political problems and the fall of the dollar, the prices of oil would not be at this level,” he was quoted as saying.

He added: “The prices are high due to the fact of the recession in the United Sattes and the economic crisis which has touched several countries, a situation which has an effect on the devaluation of the dollar, and therefore each time the dollar falls one percent, the price of the barrel rises by $4, and of course vice versa,” he was quoted as saying in brief remarks to journalists on Sunday.

He added that: “If this (the dollar) strengthens by 10 percent, it is probable that (oil) prices will fall by 40 percent.”

Also, it’s not like we haven’t heard this before…(via CNBC April 2005):

Insana: The government, whether it’s, you know, your administration or even the Federal Reserve, that inflation’s not a problem right now. And that’s true unless you are filling up your car, buying a house, now picking up a cup of coffee at Starbucks, sending your kid to school, or paying your doctor bills. Is inflation a problem for the average American that’s going unrecognized by the federal government?

President Bush: No, I don’t think so. Yes, I think inflation can be a problem for the average American, and no, I don’t think it’s going unrecognized. As a matter of fact, why I was so strongly for tax relief, you know, I, I, I want there to be more money in the pockets of the average American family. And, you know, some are talking about running taxes back up. I think it would be a huge mistake. I think it would hurt the economy, but more importantly it would hurt the average American family.

Insana: One item that seems to be pushing up the price of oil is a falling U.S. dollar, because oil is priced in dollars.

President Bush: Right.

Insana: And some people are wondering if you are prepared to make a forceful statement or take forceful action to boost the value of the dollar and help drive down the price of oil.

President Bush: Right. Well, I, let me, I, I’ll try to make a forceful statement right now. This government is for a strong dollar. We do believe the market ought to set the price of the dollar relative to other currencies, but we are for a strong dollar.

Think we might want to try a different “strong dollar” policy since the one we’ve been using is failing miserably? We’ll kill two birds with one stone…inflation will go down and our energy prices will get better. Or we can allow “the market” to keep determining how much our currency is worth, which is basically made up of the rest of the world openly manipulating theirs to gain the upper hand.

Either way, one thing’s for certain…we always have a choice and right now we’re choosing to do absolutely nothing.