Tuesday, October 23, 2007
1yr in Oil prices plotted against most major currencies.
High oil prices will feed into inflation, causing interest rates to rise and asset (house) prices to fall. Many have suggested that the current bout of high prices is purely the result of a weaker dollar (given that oil is priced in dollars). This is a point that I have countered, but this link does the job far better, plotting the cost of oil against a number of major currencies. The picture it paints is that currency has little to do with the current bull market and all eyes are on supply and fear of it. If so, this is a structural or cyclical issue that will not simply go away, I personally think its a structural one, traders aware that peak oil is upon us, but that debate will only be solved a few years after the event when trends become clear.