[EMAIL PROTECTED] wrote:
Hi all,
This is the first time I post on this message board, so please be gentle
=)
I just wanted to provide an outside view on the rising oil prices. To me
it seems like the value of $ has been dropping and if you look at the
increased price of oil and compare it to the falling value of the dollar
the two do seem to correlate very nicely...
If I buy oil in SEK or Euro the oil prices has almost stood still...
So are oil prices really climbing or is the dollar falling?
The Economist had an article on this just a few days ago.
This question is harder to answer than it seems. Like many questions
where one would like to find a "sound bite" answer, there isn't one.
It's not trivial to define "the value of the dollar". There's more than
one way to measure inflation. However, the two most common measures,
which use the consumer or producer price indices, incorporate the price
of oil in the definition of the "value" of the dollar -- and that's
circular when we're trying to determine the cost of oil!
In fact, the total fraction of world income spent on oil is still
substantially smaller today than it was back in the early 1980's, which
probably explains why markets in the developed world have mostly not
shown all that much impact from the "high" oil prices as yet.
On the other hand, in my personal opinion oil is heading for $200/bbl,
probably within a year. Once it gets that high it will have passed all
previous peaks no matter how they're measured, and I think we're going
to see some severe consequences.
Anyhow here's the relevant text from the Economist's article, which is
brief:
*****************************************************
*Crude estimates*
Apr 17th 2008
From The Economist print edition
*The price of oil has soared to a new high, hasn't it?*
A CASUAL observer might be forgiven for thinking that the oil price
reached a new record, of $115.07 a barrel, on April 16th. And so it did,
in nominal terms. But by other measures, oil is not quite as expensive
as it seems. That, in turn, may go some way towards explaining why
demand for oil continues to rise in many countries, despite prices that
would have been unimaginable just a few years ago.
Michael Lewis of Deutsche Bank has come up with several different ways
of comparing past and present oil prices. The first step is to account
for inflation. But what measure of inflation is most suitable? If
historic prices are inflated in line with America's producer-price
index, the previous record, struck in the early 1980s, would be the
equivalent of $94 in today's money—a level exceeded some months ago. But
if the consumer-price index were used instead, oil would need to climb
to $118 to hit a record.
But an adjustment for inflation, however it is measured, takes no
account of the growth in Western consumers' incomes over the years. Back
in 1981, the annual average income within the Group of Seven countries
would have been enough to buy only 318 barrels of oil. To set back
Western consumers by the equivalent today, Deutsche Bank calculates, the
price of oil would have to rise to $134 a barrel.
By the same token, the American government reckons that energy ate up
its biggest share of Americans' disposable income in 1980: 8% compared
with about 6.6% now. To drive spending on energy to the same level
again, says Deutsche, the price of crude would have to rise to $145.
Spending on oil as a share of global output, which is about 3.5%, also
peaked in 1980, at 5.9%. Other things being equal, oil will not swallow
as big a share of the world's GDP unless the price reaches $150 a barrel.
