Wednesday, October 3, 2007

The Price of Oil

A substantial part of the runup in oil prices over the last few years is a function of the falling American dollar.

That sentence was spurred by a friend wondering why gas is cheaper now than it was last year, despite an increased price of oil - when stated in USD. Well, because the CAD has appreciated, just as most currencies have, relative to the USD.

Conclusion: Someone needs to index the oil price so that is abstracted from currency movements. Sadly, I do not have a reliable method to do this. Does such an index exist?

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