The price of oil in Euros.
As I write this, oil is trading at an eye-popping $123.39 per barrel on the NYMEX futures board. Part of the high price of oil stems from the low value of the dollar relative to other currencies — especially the euro — so the other day I pulled together some figures to see how much cheaper oil would be if it were priced in euros instead of dollars.
Inputs:
- Price of oil in dollars, taken from the Energy Information Administration of the US Department of Energy.
- Exchange rate, dollars to euros, taken from Exchange-Rates.org.
Timeframe:
- 5 November 2007 through 29 April 2008 (i.e. Tuesday of last week).
Results (greenbacks in green, euros in blue):
My simple-Simon conclusions:
- The exchange-rate divergence has meant more and more over the past couple of months.
- Even when priced in euros, oil is still plenty expensive.
Other items potentially of interest in this vein:
- Statistics Matter: Oil, Dollars, Euros & Gold — This one includes a chart scanned from the Wall Street Journal earlier this year.
- Crude Oil Prices, Dollars vs. Euros: Is There a Difference? – I used this post’s sources in formulating my own chart.
- U.S. gas: So cheap it hurts: “Relatively low taxes have kept pump prices far below most other developed nations, which some say is precisely why the current runup is so painful.” — This article explains why “the U.S. is actually one of the cheaper places to fill up in the world” and digs into the effect of government policy on gasoline prices.
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Category: Energy, Globalization5 Comments so far
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Ah yes. The good old days when oil traded below $125 a barrel. It’s been but two weeks and oil is above $135. That’s an 8% increase…in two weeks.
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Although your chart shows a divergence since Nov 2007, the difference in the value of the euro vs the dollar amounts to nearly a 57% premium in US $ vs the euro since early 2003. This corresponds to the start of the Iraq war and the US Gov’t borrowing and spending dollars without the income (taxes) to pay for it. Clearly fiscal policy and (ir)responsibility are responsible for the runup in oil prices in US dollars.
James — I agree that fiscal and foreign policy have plenty to do with the price of oil. But Peak Oil mavens and students of geopolitics would also point to other factors, including fundamental tightness in supply that operates largely independently from U.S. policy.
It will be interesting to see what steps the next presidential administration (or the current one, in its waning months) takes to address these issues.
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