Why oil prices are at a record high

REUTERS, London- US crude oil hit an all-time high of $119.93 a barrel on Monday. Robust demand for crude and a weak dollar have fuelled the rally from a dip below $50 at the start of 2007.

Adjusted for inflation, oil is now above the $101.70 peak hit in April 1980, according to the International Energy Agency, a year after the Iranian revolution.


The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

Some analysts say investors have been using oil as a hedge against the dollar. At the same time, the weakness of the dollar has also cut the purchasing power of OPEC’s revenues.

OPEC oil ministers have said that although prices are at a record nominal high, inflation and the dollar have softened the impact. FUND MONEY Since the Federal Reserve cut U.S. interest rates and central banks pumped billions of dollars into financial markets to ease a credit crunch, oil and gold have risen.

Reuters