There was an article written recently in the Wall Street Journal that touched on the subject of the weakening dollar contributing to higher gas prices.
If you look at the price of oil in the last 10 years in terms of dollars- it went up 350%.
In terms of the Euro- oil went up 200%.
Interestingly, if you look at oil in the last 10 years in terms of the price of gold- it has stayed flat.
The prices of soybeans and wheat increased by 75% in 2007, far outperforming oils increase of 57% in 2007. Neither OPEC, China, or any global cartels were responsible for this increase. The weakening of the dollar is the main factor.
If the dollar had kept pace with the euro these past 10 years, a barrel of oil would cost roughly 57$ compared to over 100$.Given our weakening economy, the Fed is under pressure to cut interest rates and provide banks with some liquidity. If this continues to weaken the dollar, we will continue to see the price of oil and other commodities rise.
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