Is Oil Really Driven that much by Weak Dollar?

Discussion in 'Commodity Futures' started by bettles, Jun 7, 2008.

  1. bettles


    I'm always hearing that one of the biggest reasons for oil prices to rise is the weak dollar. The logic is that oil is priced in dollars, so the price of oil must increase to maintain the same actual price as the dollar decreases in value.

    Yet, compare how much oil has gone up with how much the dollar has gone down and there is a big difference. Take the euro, for example, as it makes up more than half the US dollar index. At this time in 2004, the euro was worth around 1.25 dollars. Today it is worth about 1.65 dollars. So the euro has increased in value, versus the dollar by about 35% in 4 years. Meanwhile, oil has gone from around $40 to $130, or over a 300% increase. If the weak dollar is really responsible for the "majority" of oil's price rise, why is oil up more than 8 times more percentagewise as the dollar is down?
  2. Bowgett


    Price of oil quadrupled in euros since 2003

  3. it's not responsible for the majority of the move but it is part of it.