NOYB wrote:
wrote in message
oups.com...

NOYB wrote:
wrote in message
ups.com...
While fuel prices are in the news a lot these days, we might do well to
realize that the value of crude oil hasn't really gone up as much as we
think- much of the price pain is because the US dollar has gone down.

Oil is an international commodity, and the producers can sell it almost
anywhere in the world. The US dollar is getting clobbered on foreign
exchanges all around the planet. It took $1.60 Canadian to buy a US
dollar about a year ago, and it now takes only about $1.20. It's the
same with almost all other currencies vs. the dollar. If we're going to
buy an internationally marketable resource and pay for it with a
declining currency, why should we be surprised if it takes more of
those depreciating dollars to buy the same bbl of oil?

Hogwash. Denmark, the Netherlands, and several other countries pay more
than $6/gallon for gas. Countries like Iraq pay less than 20 cents. The
value of the US dollar has nothing to do with either of those situations.


"The value of the US dollar has no bearing on how many US dollars
Americans must pay for imported oil"? Did you really just advance such
a theory, NOYB?

Oil prices are based in U.S. dollars. If fifty US dollars buys a barrel of
oil, and the dollar's value drops relative to the Euro, then the price of
oil appears cheaper to countries that use the Euro. Oil doesn't appear more
expensive to people buying it in US dollars! Only supply and demand can do
that.





Why would you do that? Could it be because the runaway federal spending
by the R majority congress and approved by the R president is one of
the primary factors causing our dollar to take a beating?

A weak dollar is good for trade. We may have some of the highest trade
imbalances that we've ever seen...but they're mostly with China. And that's
only because China has pegged its currency to the US dollar.

If the dollar was strong, the trade imbalance would be even worse because it
would cause a larger trade deficit with other countries besides China.


Please explain why the relative value of a nation's currency has no
effect on the pricing of imported commoditites (such as gourmet Iraqi
hogwash).

Because the price of oil is based in US dollars. Always.

A weak dollar just makes the oil cheaper to other countries. It doesn't
make the oil more expensive to the US consumer.
However, oil is *not* cheaper to other countries despite the relative
strength of their currency. Why? Because the price of oil is a factor of
supply and demand (whether that demand is real or perceived)...and not the
strength of the US dollar.


Your reply overlooks the fact that the seller will demand a greater
number of US dollars for a bbl of oil when that currency is weak. The
exporters of oil make a vast number of purchases in Euros and other
currencies that are ascending against the dollar, and want to maintain
or increase their own purchasing power when the transaction is
completed.

Suppose you accepted returnable pop bottles for a filling. Let's say
that the deposit refund in FLA is 5-cents a bottle, so if you accepted
payment in bottles, I would need to bring in 4000 pop bottles for a
$200 drill and fill at your practice. If the depopsit refund dropped to
4 cents (the value of my currency declined) I would need 5000 pop
bottles to pay for the exact same work.

Yes, the price of oil is express in USD, (for now- may soon be in
Euros). But as the purchasing power of those US dollars spent in the
international marketplace continues to drop a greater number of them
will required for the seller to maintain a consistent purchasing power.