Oil Price vs. Declining Dollar

[Telly]

I see this referenced so many times in the news as the big/little/not-at-all cause for oil's runup, but no real data provided.

So I did a very simple calculation.

Oil has doubled since this time last year. That's a 100% increase.

The Dollar has declined from ~$1.22 per Euro to ~$1.57 per Euro, about a 28% drop in value using $1.22 as the base.

So only a little over a quarter of the increase in the price of oil is due to the decline of the Dollar over the one year time frame.

Seems simple, am I missing something?

[Want2retire]

Originally Posted by Telly

I see this referenced so many times in the news as the big/little/not-at-all cause for oil's runup, but no real data provided.

So I did a very simple calculation.

Oil has doubled since this time last year. That's a 100% increase.

The Dollar has declined from ~$1.22 per Euro to ~$1.57 per Euro, about a 28% drop in value using $1.22 as the base.

So only a little over a quarter of the increase in the price of oil is due to the decline of the Dollar over the one year time frame.

Seems simple, am I missing something?

You make a good point. I'd like to add, parenthetically, that you are assuming that the Euro is a constant standard. Maybe it would be preferable to assess the decline of the dollar relative to commodities such as gold or silver?

[Leonidas]

Recently I looked at the dollar effect on the price of gasoline and approached it from a different methodology and a longer time frame. I've already tossed my notes, but my back of the envelope numbers indicated that the weak dollar added a little over 30% in nine years. My method was to look at retail US gas prices vs. those of countries like France, Germany, Belgium, and the UK.

[d]

just checked using daily data over the past 3 years: every 1% decline in the value of the $ (major currencies index) apparently* yields about a 3% increase in the price of oil (west texas crude). (*since there are other things going on that effect the price of oil, this is very important word!) using shorter periods of time, the effect is considerably greater (about 4.4% over the past one year).