The price of oil continues to rise.  The perception that the world economy is consuming more petroleum is partly correct.  A more immediate reason and driving force for the price of oil is the value of the dollar against other currencies.  Over the past two years the US dollar has fallen in value against the pound, the yen, etc.  Take note of the Canadian dollar which was 30% to 35% less then the US dollar two years ago.  Today it is approximately on par.    As most oil worldwide is sold in dollars the value of a barrel of oil becomes critical for countries such as Saudia Arabia, Nigeria, etc.  They have to maintain a certain level of income in order to support their infrastructure, population and stability within.   As the dollar loses value they need to increase the value of oil interms of dollars.    Until the dollar rises in value against other currencies its going to become difficult for the price of oil to fall below $70 a barrel.  It is more likely to head higher.  As such the cost of goods and materials within the American economy will begin to rise but the country will see an increase in exports.�

This entry was posted on Sunday, October 28th, 2007 at 2:42 pm and is filed under Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.