Thinking about petrodollars

[phantom power]

I wonder what a barrel of oil would cost these days, if the dollar floated freely against the price of oil.

[valerief]

1. I think about electric cars. nt

[GliderGuider]

2. I thought it did just that, at some level

At least to the extent that the world's underlying economic structure is dependent on its skeleton of oil. Shouldn't that mean that the value of currencies and the price of oil would move inversely to each other? I.e. the cheaper the oil, the easier it is to build economic strength and therefore raise currency values. As oil gets more expensive it puts a drag on economic growth that can only be partially offset by decreasing the energy intensity of the economy; as a result the value of the currency declines.

Of course there are a lot more factors at work, some of which would completely mask the effects of oil prices on particular currencies, but it should be possible to track an overall correlation. I may be completely out to lunch here, because my grasp of economic nuance is marginal at best, but this makes intuitive sense to me.

[pscot]

3. Taking your premise a step further

If oil prices and currencies move inversely, rhe currencies of those nations using the most oil should show the greatest weakness in the face of rising oil prices. Just one more factor, among many, pushing the dollar down.

[GliderGuider]

5. As long as you mean

the currencies of those nations using the most oil per dollar of GDP I agree. The USA is actually in a fairly good position from this point of view. Wikipedia has a basic article on Energy Intensity, but you have to factor in the proportion of its energy that a country gets from oil and natural gas. Countries like France may be less vulnerable than it first appears because of their extensive development of nuclear as opposed to natural gas electrical generation.

[oldhippie]

4. That makes no sense..................

The dollar does float freely against the price of oil. The price of oil is denoted in a currency, often US dollars. It changes (floats).

Your question would maybe make more sense if you meant the "value" of oil? But then again, the perceived value is reflected in the price.

Not sure what you were really asking?????

[lakeguy]

6. don't countires need to buy dollars to buy oil...

thus keeping the dollar artificially inflated?

[phantom power]

7. Oil is traded in dollars. Other countries must use dollars to buy oil.

It requires all other countries to keep United states dollars on hand so that they can purchase oil. This arrangement artificially stabilizes the US dollar.