The Post has yet again assigned magical powers to the fact that oil is priced in dollars. It told readers that "since crude oil is priced in dollars, a weak dollar makes oil cheaper abroad and high prices in dollars more sustainable." Let's try to write this so even a reporter can understand it. Oil is bought and sold in a huge market. The unit of account happens to be the dollar. This means that if the value of oil against all other commodities remains fixed, and the value of the dollar falls against other currencies, then the price of oil will be higher measured in dollars, and essentially unchanged in other currencies (there are some secondary effects -- if oil is more expensive in dollars, people in the U.S. will buy less, which can make the price of oil somewhat cheaper measured in other currencies). The same would be true if oil were priced in euros, yen, bushels of corn, or gallons of peanut butter. There is no special importance to the fact that oil happens to be priced in dollars. So, let's get the story straight and stop confusing readers.
--Dean Baker
