Finally, a simple explanation for why oil (and our gasoline) is expensive
November 5, 2010
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Came across an article about today’s oil prices. In it, it explains why oil prices are high (which is why gas prices are as well):
Oil is priced in dollars and becomes cheaper for holders of foreign currency when the dollar falls. Europeans, for example, get more dollars for their euros and can buy more oil for fewer euros. Since oil is cheaper for them, they buy more, sending up the dollar price of oil.
Energy traders expect this to happen, so they buy oil when the dollar falls, boosting the effect.
When the dollar weakens, investors would rather hold hard assets like oil and other commodities because hard assets protect them against more weakening and inflation.
Link to article is here: Oil above $87 in Asia, at highest since early May