Well I was just wondering how bad this is going to get after reading some things about the recent slide in the dollar and how that is reflected in oil.
recently we have seen the dollar go through a pretty major slide in value as compared to other world currencies which in effect has driven the price of oil higher for the US.
This is on top of the increasing price per barrel of crude.
So here is the thing we have the dollar sliding south and oil heading northward. Which would be the same thing as crude hitting a major spike.
Is this dollar value drop going to hide PO?
PeakOil is You
The slide in dollar means a higher Petro.
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The slide in dollar means a higher Petro.
by Eli » Sat 02 Dec 2006, 13:20:01
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Eli - Intermediate Crude
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Re: The slide in dollar means a higher Petro.
by Kingcoal » Sun 03 Dec 2006, 12:18:53
$this->bbcode_second_pass_quote('Eli', 'I')s this dollar value drop going to hide PO?
Technically, because oil is priced in USD, the US can force down the real price of oil by printing more dollars. It works like this; the US increases the money supply by 20%. The dollar supply goes up 20%, oil goes up 20%, higher prices eventually cause demand destruction, oil prices slide back 10%. By printing more dollars, the US forces a real 10% discount in oil (in this hypothetical example.) Commodity producers are forced to eat a percentage of the dollar depreciation. Not only does the US get the discount, but because other currencies, like the Euro, go up against the dollar, they get the discount also. However, since the Euro is now more expensive, EU exports become that much less desirable to Americans, unless EU producers hold their prices (in dollars) steady - again, the producer has to eat dollar depreciation. US vacationers are less likely to take a European vacation and European vacationers now eye up cheaper American vacations.
This game worked like a dream in the late nineties and produced, when adjusted for inflation, the cheapest oil the world has ever seen. Not surprisingly, the world economy boomed in the late nineties.
However, with PO, oil demand destruction doesn't happen. The only thing accomplished is that the US goes more in debt and the US pays more for oil. That, in a nutshell, is the problem that the dollar is now having.
Oil prices tend to be directly proportional to gold. In fact, recently this diverged a little and some people think this signifies an unstable condition.
I wouldn't doubt it if oil starts getting spot priced in grams of gold. There is a lot of talk about pricing commodities in Euros, but that is just another fiat currency and I think that commodity producers, if forced to make a change, would just go straight for gold - I would. Before dollar hegemony, international deals were settled in gold, meaning, the price was quoted in terms of gold and payment was accepted in whatever your currency's value was in relation to gold. That would definitely put a serious damper on this maddening currency inflation, which was the original reason why we had a gold standard. The more things change, the more they stay the same…
$this->bbcode_second_pass_quote('', 'T')he central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.
Thomas Jefferson
"That's the problem with mercy, kid... It just ain't professional" - Fast Eddie, The Color of Money
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