Tuesday, November 27, 2007

AMERICANS SUBSIDIZING DOLLAR WEAKNESS WITH HIGHER GAS PRICES

I filled up my tank this morning... $3.51/gallon for regular... I'm talking about the cheap stuff. Of course, this is out in California where we are seeing the highest prices in the country, but I'm sure you've noticed gas prices are through the roof wherever you live.

I got curious about how much oil prices have actually increased this year so I started doing some digging... I found this chart which basically showed crude prices over 2007...



This chart showed me that crude prices had certainly increased over 2007, but I wondered if that was the whole story... I decided to map crude prices in dollars versus crude prices in euros (and, for fun, gold ounces)... I wanted to see if the price increases we were seeing on oil were occurring across all currencies or was the recent weakness in the dollar having an affect...

So, I grabbed crude oil prices in dollars for each month of 2007 (to date). I then mapped euro's and gold prices for each month using the historic currency converter at xe.com. Then, to normalize each data set, I found the percentage increase/decrease from month to month for each currency and charted it:



The fluctuations between the months looked about the same between the currencies, but you do notice that every time oil prices have spiked during the year, they have increased more in dollars than euros or gold. Interesting. Also, every time oil prices drop, they seem to drop more in euros and gold than in dollars....Also interesting. However, this really didn't show me the whole picture. I decided just to take the price of oil at the beginning of the year (in dollars, euros, and gold ounces) and compare it against the price of oil now, then see what the percentage increase was for each currency.



As you can see from this chart, the data is clear. Oil prices have increased 93% (in US$ dollars) since the beginning of the year. Compare that to a 66% increase in oil prices in euros and only a 49% increase in oil prices in gold ounces.

Which leads me to my conclusion... the American people are subsidizing the weak dollar by paying more for gas at the pump! This really hits home for me and, I expect, a lot of Americans. Many may not understand the intricacies of the currency markets and how they affect wealth, but they can certainly understand this.

I understand those which are saying that a weakened dollar is actually good for the U.S.A. because it makes our goods cheaper for overseas customers, which should help us balance the trade deficit. I get that. However, I don't want to subsidize a policy like this! It's like we are being forced to pay an export tariff for goods leaving the country!

I'm a fiscal conservative and have constantly been disappointed with this administrations monetary and fiscal policy. No matter what the MSM trys to force feed me, I can see with my own eyes that Bush is a big-government, liberal spender. I'm sick of it.

Please don't make the American people pay for your inept monetary policy Mr. Bush...

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