Daily Wisdom

June 23, 2008

Weak Dollar, High Oil Prices

I found the following chart HERE. It shows pretty clearly how the weak dollar has affected oil prices. Notice that back in 1999, the Euro and the Dollar were effectively equal. Since then, the dollar has dropped in value to approximately 60% that of the Euro. As a result, when this chart was prepared the same barrel of oil that cost €75 (Euros) also cost $119 (US Dollars). In other words, if the Dollar had maintained its value against the Euro, then the cost of oil would be just $75 per barrel instead of $119.


At 6/24/2008 1:37 AM , Anonymous camojack said...

Drill here, drill now, pay less.

At 6/24/2008 8:15 AM , Blogger Hawkeye® said...

Amen brother!

At 6/25/2008 6:17 PM , Blogger Elroy said...

How come, then, that oil is expensive in Europe too? By your logic surely the Europeans would be swimming in it, yet they are blockading the streets because they can't afford any.

And kiddies, just because you pull your own oil out of the ground in the USA doesn't mean it will be an cheaper. Have you never heard of the World Parity Pricing mechanism?

Competition, scarcity, war and speculation. Solve those and you might be able to fill that SUV again, but not before. Maybe not ever.

There is the possibility of the midwest becoming like a big sky Havana, scattered with rusting SUVs that no one can fill. Oops! Be careful what y'all wish for!

And the oil of ANWR won't save you, and neither will the tar sands of Canadia – there's either not enough, or it's too expensive to get to.

How's your bike looking?



At 7/01/2008 9:23 PM , Blogger Hawkeye® said...

Sorry it took me so long to respond. I've been a busy boy...

Regarding oil prices in Europe, they pay the going rate for oil same as everybody else. Their prices have been going up too as you can see from the chart. I'm just saying that our prices are even higher than they would have been if the dollar as strong as the Euro.

However, Europeans pay even more at the pump than we do because of taxes. According to an article at CNN, "Many European nations tax gasoline heavily, with taxes making up as much as 75 percent of the cost of a gallon of gasoline."

And if we pull more oil out of the ground here the US, the price WILL be cheaper than it otherwise would have been. It's simple "Economics 101"... Supply and Demand.

I think you know how that works. If the demand continues to increase without corresponding increases in supply, prices go up. ANY increase in the supply will help reduce prices (or slow price increases) on a world-wide basis. In other words, if we pump, even YOU get some benefit. But don't think we'd be doing it for your benefit (:D)

The price of oil has little to do with "competition, scarcity, war and speculation", as you suggest. Competition is always a good thing. Oil cartels (ie, OPEC) are NOT competitive. OPEC is a private club that attempts to CONTROL the market through collusion. If there was some REAL competition in the oil market, prices would fall.

And there is really no scarcity to speak of. The oil is there if we want it. It's in North Dakota, ANWR, off the coast of New Jersey, Florida, California, and in the Gulf of Mexico. We just have to go get it. And the US government is the biggest roadblock to getting it.

War can indeed cause disruptions in oil supply, but the wars in Iraq and Afghanistan have had little effect on the price of oil. It's the wackos like Ahmadinejad and Chavez that we have to worry about.

As for speculation, the International Energy Agency today said it's not a factor.

And I don't drive an SUV. Never have. I drive an economical sedan, as do my wife and daughter.

You said... And the oil of ANWR won't save you, and neither will the tar sands of Canadia – there's either not enough, or it's too expensive to get to.

First of all, there's PLENTY in ANWR. We need it. We should have it. Whether there's "enough" or not.

Second, if the prices keep going up, then pretty soon it WON'T be "too expensive" to get to.

Third, what is YOUR solution to the problem? I can use a bike around town but I haven't seen too many pedal-powered railroad trains, or geothermal automobiles, or solar-powered 18-wheeler trucks, or wind-powered earth-moving equipment.

Fourth, whatever your response to #3 above, it's probably wrong. The CORRECT answer would be that we need it ALL. We need oil, coal, natural gas, propane, nuclear, hydrogen, HHO, hydroelectric, fuel-cells, and battery power. We need wind, solar and geothermal where it's feasible, but some days the sun don't shine and the wind don't blow. And geothermal is only where you find it... it ain't portable or mobile.

That's the difference between us Elroy. You look at a problem and say what CAN'T be done. I look at a problem and say, get outta the way and let me get 'er done!



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