Wednesday, March 31, 2004

Rising gas prices and Fall of the Dollar Correlated?

I am not so sure, but see here:

[H]ere is the answer to my question about the sudden rise in gasoline prices as it came from Michael Wang, senior vice president of John S. Herold, Inc., a firm that keeps track of world energy prices on a minute-by-minute basis. "It's pretty simple," he said. "And it is directly related to the sharp decline in the value of the dollar on the world markets. If you compute the world price of petroleum in euros rather than dollars, the price of oil is about the same. If you want the price of gasoline to remain steady, the best thing Americans can do is to reduce their government's budget deficit and their nation's trade deficit."

Whether the tax cuts are responsible for budget deficits and if that has any effect on a weak dollar is something I can not say confidently (although I have an opinion). I am becoming more convinced than ever before that I need to take a course in Macroeconomics.


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