Hundred-Dollar Oil My Foot

A good part of the rise in the oil price has been the result of simple inflation, totally separate and apart from anything going on in the supply and demand for oil itself. I know this is true because the oil price measured in dollars has nearly doubled over the last two years, but when measured in euros it’s up only by about half. The difference is the inflation that has eroded the value of the dollar, but has not touched the euro.

If such a large fraction of the rise in the dollar price of oil is really the dollar’s fault — and not oil’s — then to think that the oil price will double from here would seem to require that the U.S. dollar collapse to catastrophic lows.

SmartMoney.com