Oil and Exchange Rates

FLG remains convinced that one of the largest influences on the price of oil is the relative strength of the dollar. He ran a quick and dirty regression a while back and found that dollar fluctuations account for 77.55%.

So, he always finds his CNNMoney world business RSS feed funny. It proves over and over that this is the case. FLG has selected the headlines that apply, and they are in reverse chronological order. Top being most recent.


Dollar falls on Chinese rhetoric
Oil rises on Nigeria, stock gains
Oil tumbles more than $1

Dollar slides as stocks stabilize
Oil prices creep toward $70

Dollar rises on euro weakness
Oil falls below $67

Dollar and yen slide
Oil settles below $70

Dollar slides against euro
Oil rises on recovery hopes

What's funny is that most of these are posted back-to-back. They just happen to be in the wrong order. Maybe the oil coverage is a bit faster than the currency coverage, but rarely does the story mention dollar fluctuations as the primary cause. Sometimes there are other causes, like an attack on a Nigerian oil field, but day-to-day oil prices are chiefly caused by the fluctuations of the dollar on the world market. Dollar down, oil up. Dollar up, oil down. You can see it from the headlines above if you just reverse the oil-currency ordering.