I need someone to explain why a weak dollar = expensive oil. I don’t get it. If the dollar is weak, and oil is traded in it, wouldn’t oil be cheaper?
When OPEC was formed they agreed to price oil in dollars. That was when the dollar was on the gold standard and was a stable currency.
Since Nixon took us off that gold standard (and the ensuing OPEC embargo) the dollar "floats" on the world market against a "basket" of currencies.
In 1964 an US Quarter (90% silver) would buy a gallon of gasoline. In 2008 that same 1964 US quarter is worth about $3.65 and will still buy a gallon of gasoline.
So if you have gold or silver, you wouldn't notice much change in the price of gas.
What's dramatically changed is the value of all that paper money you have.
Gold is also traded in dollars. Does it get cheaper when the dollar is weak? Um, no.
When dollars are weak and getting weaker, people dump their dollars for real assets. As the dollar gets weaker, the relative value of real assets goes up. If the dollar gets weak, then gold — which is stable and kind of has the same value relative to goods and services overall — goes up.
If the dollar loses half its value, then it takes twice as many dollars to buy the same weight of gold it used to take. An ounce of gold that used to cost $400, now costs $800 because the dollar is only worth half of what it used to be worth.
The same is true of oil. Oil is worth what it is worth relative to other goods and services. Right now the price of oil hasn’t gone up too terribly priced against the Euro, which is strong. It has skyrocketed against the dollar, which is weak.