Publications: Notes at the Margin

Oil and the Dollar: No Longer Countercyclical (November 7, 2022)


Surging US energy output and exports, combined with the global food shortage precipitated by Russia, have changed a fifty-year fundamental relationship in oil markets to the economic detriment of oil-exporting countries and likely all world oil and gas producers. In the past, rising oil prices were consistently associated with a decline in the dollar’s exchange rate that cushioned world consumers from rising prices. That relationship has been broken. Now, rising oil prices are associated with a strengthening dollar. Thus, for countries that import oil and natural gas, the impact of an increase in the dollar price of oil and gas is magnified in their currencies.


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