Oil and the Dollar, The Wall Street Journal Friday, January 4, 2008 A10
Over the past six years the price of oil has risen considerably, now up near $100 per barrel. There are various reasons for the rise in the price of oil including the growing economies of India and China causing a higher demand for oil in these countries. Supply and demand have indeed played a prominent role in the rising oil price, but this article argues that the main reason for the absurd price of oil is the failing U.S. dollar. "If the dollar had remained as 'good as gold' since 2001, oil today would be selling at about $30 a barrel and not $99." Also if the U.S. dollar had remained as strong as the euro throughout the past decade, the price of oil would be around $57 per barrel and not $100. The author of the article blames the poor fiscal policies of the FED for the feeble U.S. dollar.
I thought this was a very interesting article concerning the price of oil. It suggests that the problem of exorbitant gas prices lies in the policies of the FED rather than the profit hungry oil companies whom people are so quick to point fingers at.
The article this post is about is found in the hard copy Wall Street Journal, and thus I cannot provide a link to the entire article.
An economist arguing the opposite side of this debate can be found on this link. Click Here.
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4 comments:
I agree with you, Kurt. The FED is responsible for a lot of the problems we are having today, and they are one of the biggest factors in American economics today. Basically, what they say is law. They are the reason for the poor housing market, and it is easily plausible that their policies could affect oil prices as well. A very intuitive point...I'm glad you caught it.
Wow, i would have never thought about the oil crisis in the light if you would not have brought it up. It is interesting how many things can be affecting one issue. To the naked eye it appears that we are all being taken advantage of by the large oil companies, but in reality it may all be happening in our own country.
Yes, very interesting. The FED is full of enough red tape to easily upcharge something such as oil. I still think the government should charge a large tax on gas. I wouldn't like it but we need to diversify our nation (and it would give more job opportunities to researchers like me).
There is definitely more than just large companies trying to make money. I believe that a lot of it has to do with the weakening US Dollar, like you mentioned. Unemployment, inflation, the weak housing market, the Iraq War (did you know it's up to 250million dollars a day now?), and the growing national debt all contribute to the weakening of the US dollar.
Oh, and please, don't tax gas. Please.
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