Let's say it another 200 billion times, the fact that oil is priced in dollars makes no difference whatsoever in terms of the price that people in the U.S. or anywhere else pay for oil. When the dollar falls, the price of oil goes up in dollars, the price of oil does not change measured in euros yen, or pizza.
Steven Beard, a financial analyst, got this completely wrong in a segment on Market Place radio this morning. He noted that the European Central Bank was likely to raise interest rates this week. He then told listeners that they would do this because they were concerned about inflation.
Going back and forth with the host, they noted that one of the main sources of inflation is higher oil prices. They then told listeners that if the dollar falls, then the price of oil rises.
Implication: those dumb European bankers will make their inflation problem worse by raising interest rates because they will have to pay more for oil.
Reality: if the dollar falls by 10 percent against the euro (an exaggeration), then the price of oil measured in dollars will rise by roughly 10 percent. Since Europeans will be getting 10 percent more dollars for each euro, the price they pay for oil will not be changed.
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