Wednesday, April 16, 2008

AGI: Oil Would Be $65 If USD Had Remained Strong


From the American Geological Institute(AGI):

The chart above shows the spot market price of crude oil per barrel (BBL) in US dollars and in euros from 2001 to today. The price of oil has grown faster relative to the dollar than to the
euro. Yet, a portion of the rise in oil prices is due to the fall of the value of the dollar. The graph also shows the number of barrels of crude oil per cost of an ounce of gold, demonstrating the parallel growth in commodity pricing.


If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise. The impact of increased oil prices can not be ignored in the US economy, and, in turn, can further weaken the dollar. Resource economics is a complex feedback loop where today’s resource boom is driven by many external factors. This complex system bears watching by all geoscientists.

2 Comments:

At 4/16/2008 8:33 PM, Blogger David said...

Hi: my co-author and I do not pretend that we made a very original point about the dollar and oil prices, but we draped a little history and institutional detail around it as well. You and your readers might enjoy our short article titled: "Black Gold: The End of Bretton Woods and the Oil-Price Shocks of the 1970s", in The Independent Review (Vol.IX,No.4, Spring 2005), downloadable (free!) from

http://www.independent.org/publications/tir/article.asp?issueID=41&articleID=518

Best,
David Hammes

 
At 4/16/2008 9:18 PM, Anonymous Anonymous said...

No kidding, unfortunately for holders of dollars, the dollar is headed much lower. This is the Bernankie bubble which will eclipse the Greenspan dot-com and housing bubble. Hang on for the ride.

 

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