Mike B) ***********
Tell NPR, The Dollar Price of Oil Did Not Fall Because It Is Priced in Dollars
Steve Beckner told listners this morning that oil prices rose further above $80 a barrel because oil is priced in dollars. This prompted a gargantuan "huh" from the gods of good reporting. When the dollar falls, oil will rise in price when measured in dollars even if oil were priced in peanut butter. The basic story is that if we assume an unchanged value of oil, and a dollar that is worth less, then oil costs more in dollars.
As BTP readers have noted, the price of oil has risen measured in other currencies also. This is true, clearly conditions in the oil market have pushed up the price of oil. However, we have seen a much larger increase in the United States than elsewhere in the world because of the decline in the dollar. If the euro was still at 82 cents (its 2002 low), we would be looking at oil priced in the neighborhood of $50 a barrel. (The change against the euro overstates the decline of the dollar, since it has not fallen as much against other currencies.)
--Dean Baker Posted at 05:39 AM | 0 Comments: [http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=09&year=2007&base_name=tell_npr_the_dollar_price_of_o#comments]
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