Essays on Relationship between Oil Pricing and the US Dollar Assignment

Download full paperFile format: .doc, available for editing

The paper "Relationship between Oil Pricing and the US Dollar " is a good example of a business assignment. In recent years, the price of oil has risen steadily much to the chagrin of consumers worldwide. Coincidentally, the American currency (dollar) has seen a steady depreciation trend during the same period. For example, between 2007 and 2008, the price of oil rose from $65 to $120 a barrel; during the same period, the dollar depreciated by 12% and 15% to the euro and the yen respectively (Feldstein, 2008). While the rise of oil prices and the depreciation of the dollar could be seen as a coincidence, most analysts believe it is not.

The relationship between the dollar and oil is however clear-cut. For example, while Feldstein (2008) argues that the oil prices would remain the same regardless of the currency used to trade the resource, other analysts such as Ramady (2010) argue that the impact that oil has on the dollar is undeniable. The price of oil and the dollar Some observers argue that there is a “ direct cause and effect relationship” between the dollar’ s international exchange value and oil prices (Jackson, 2010, p.

2). Such an argument is founded on the fact that oil is priced in dollars and hence any depreciation in the dollar’ s value erodes oil producers’ purchasing powers. This argument is supported by the International Monetary Fund (IMF, 2008), which notes that a change in the dollar’ s value has an effect on commodity prices. The oil-dollar link explained above is not always accepted in all quarters. Grise (2010) for example argues that any changes in the values of the dollar affect the demand of the oil by either causing consuming countries to purchase more (i. e.

when the dollar depreciates) or less (i. e. when the dollar appreciates). Faced with an increase in demand, the oil-producing and exporting companies often adjust the oil prices upwards and vice versa (Grise, 2010). Actions by the Organisation of Petroleum Exporting Countries (OPEC) are also cited as having an effect on the oil-dollar link (see figure 1).

References

Burton, T, Sharpe, D, Jenkins, N & Bossanyi, E 2001, Wind Energy Handbook, Wiley, London.

Camacho, E F, Samad, T S, Garcia-Sanz,M, & Hiskens, I 2011, ‘Control for renewable energy and smart grids’, in The Impact of control Technology, T Samad and AM Annaswamy (eds), viewed 09 May 2012

Clark, W 2003, ‘Revisited-the real reasons for the upcoming war with Iraq’, viewed 09 May, 2012 .

Clark, W R 2005, Petrodollar Warfare: Oil, Iraq and the Future of the Dollar, New Society Publishers, St Bellingham, Washington.

Cooper, P J 2000, ‘Forget the oil price, what about the euro?’ AMEinfor.com, viewed 09 May, 2012 .

Feldstein, M 2008, ‘The dollar and the price of oil’, < NBER Papers, viewed 08 May, 2012

Fisk, R 2009, ‘Oil not priced in dollars by 2018?’, Bloomberg Business Week, viewed 08 May, 2012

Garcia-Sanz, M & Houpis, C H 2011, Wind Energy Systems: Control Engineering Design, Taylor & Francis, Boca Raton, FL.

Grise, C 2010, ‘What drives the oil-dollar correlation’, Federal Reserve Bank of New York, viewed 09 May, 2012

Hau, E 2006, Wind Turbines, Fundamentals, Technologies, Application, Economics, 2nd edn, Springer, Berlin.

IMF 2008, World Economic Outlook, The International Monetary Fund, April 2008, 46-50.

Jackson, J K 2010, The U.S. Trade Deficit, the Dollar, and the Price of Oil, Congressional Research Service, Washington, DC.

Mahalakshmi, N 2008, ‘Oil marketing companies appear to hold tremendous value, but triggers for unlocking value seem nowhere in sight’, Outlook Profit Magazine, September, pp. 46-48.

Mahalingam, K 2008, ‘The Crude Spike has separated the men from the boys in sectors that rely on crude-based inputs’, Outlook Profit Magazine, September , pp. 49-51.

Press TV 2012, ‘Iran to ditch dollar in foreign trades: CBI governor’, Press TV, viewed 09 May, 2012

Ramady, M A 2010, The Saudi Arabian Economy, Springer, New York.

Rude, C 2005, ‘The role of financial discipline in imperial strategy’, Socialist Register,

Saudi Arabia 2010, ‘Saudi Arabia’, Viewed 09 May 2012

Shipley, T 2007, ‘Currency wars: Oil, Iraq, and the future of US hegemony’, Studies in Political Economy, vol. 79, Spring, pp. 7-34.

Strange, S 1998, States and Markets, Continuum Publishing Group, New York.

Vergis, I 2008, ‘Experts are deeply divided on the future course of crude prices’, Outlook Profit Magazine, September, pp. 38-45.

Warden, G 2009, ‘US rivals ‘plotting to end the oil trading in dollars’’, The Guardian, viewed 09 May, 2012

Williams, J L 2011, ‘Oil price history and analysis’, WTRG Economic, viewed 09 May 2012

Download full paperFile format: .doc, available for editing
Contact Us