A Love/Hate Relationship: US Dollar and Oil Prices

A. F. Alhajji, Ohio Northern University | May 27, 2008

High oil prices are tied to a weak US dollar. ++ The single-currency pricing of the oil market means that in the long run, a weak dollar reduces production while simultaneously increasing consumption. ++ This increase in demand and decrease in supply correlates with higher prices, and unless US fuel consumption patterns change or the dollar rebounds, the US, rather than the world as a whole, will have to "bear the brunt of single-currency oil pricing." ++ Europe and Asia are positioned to benefit from lower oil prices due to a weak dollar.