[quote=socrattt]I have a quick question for any of you gurus. If the dollar continues its’ free fall, how will that affect the oil prices? Wouldn’t the cost of oil essentially increase?
What is the short and long term possibilities that Euro becomes the new currency of oil trade? I am a bit curious to see what happens as I believe there has to be some sort of dramatic overhaul of how oil is bought sold due to the current volatility of the US Dollar.[/quote]
In think the relationship between oil and the dollar is inverse. Rather it’s oil that affects the dollar more than the other way round, hence the term the ‘oil standard’ or Petrodollars, but I forget how this works now. Basically OPEC countries sell oil for dollars which they then use to buy US treasuries. I don’t see a wholesale flight to Euro’s. Recently, we’ve seen a flight to dollars when panic hit the markets, so investors obviously still see the dollar as a safe(r) bet. How long that will last, will possibly depend on Asia’s confidence in the US ability to bring back some stability the to the markets.
