CRUDE/DOLLAR CORRELATIONS, NOT CAUSATIONS

摘要

One of the stranger aspects of sharp crude oil price movements, both higher and lower, is how someone will link the declines to a stronger dollar and the rallies to a weaker dollar and walk away without providing any evidence for this assertion or having to face any skeptical questioning. The assumption, accepted as one of those truths we should hold self-evident, is based on crude oil being priced in U.S. dollars and, therefore, a higher dollar will make crude oil imports more expensive for non-U.S. dollar buyers and vice-versa. This argument used to be compelling for a static asset such as gold where production is limited and where actual consumption is a small fraction of demand. The idea was that an increased supply of paper money chasing a limited supply of gold would be a good barometer for both expected inflation and for the relative purchasing power of the dollar or whatever currency vou wished to use at the time.