Why crude oil matters ?

[yourf16]

Hi Fellas

i don't think that one dollar today is really one dollar. its value has gone down over years and its real value is probably half. that is 50 cents !
so the fair price of one barrel of oil should be doubled, somewhere around $70

this high oil price makes everything expensive for americans and the average person will lift the finger at US government. so the government has been behind the sharp oil price fall recently. not just through media but in the market as well. they have been selling hard. look at the oil price chart. volumes tell the real story.

why the dollar lost its value is a long story, summary is that US has been printing billions of dollars to buy cheap goods from the world. The world trusted the US government when they said the annual inflation rate is 2%. They lied ! in fact it was around 7-10%

recently OPEC and the third world just realised the ripoff and decided enough is enough. so thats why basic materials whole sale prices have been rising. dollar true value is being realised and its getting more and more expensive for US to import oil and other stuff. countries like iraq realized the US government cannot be trused anymore so they priced their oil in Euro. I think the world will follow and euro will become the base currency around the world. goodbye dollar.

what happens when you earn one dollar a day and spend two a day. thats basically what the US economy is all about and the world just realised.

don't you agree?

 

[Mr. Charts]

No.
There is no "fair" price for anything. Price is where supply and demand meet. One or both can be influenced sometimes by governments in the short term, but in the global economy market pressures are generally stronger and are the principal motivator.
There are many other factors involved.
Increased demand for oil and basic commodities from India and China and anticipated or actual supply problems are also major influences.
Futures trading by large players and/or a larger number of smaller players also influence price movement by the supply by sellers and demand by buyers of contracts.
The movement of interest rates and the overseas demand for US Treasuries and other asset classes are also factors.
Although current US policy is partially dictated by lack of domestic savings and the current account deficit, I assure you the US government has no intention of allowing the US$ to lose its place as the main reserve currency.
Several countries peg their currencies to the US$ though there is a modicum of Chinese pressure suggesting a growing relaxation about the renmimbi decoupling. We'll see.
Indeed in the longer term the Euro is a much less attractive option due to poorer economies, monetary and fiscal policies and social (cost of labour) ones. The US economy will continue to be the engine of growth due to its flexibility, technical innovation, the attitude of its population, sheer economic power and much else. Yes, China will become a much more significant power and some countries will diversify a portion of their foreign asset holdings away from the US, but no one should imagine that a movement in naturally fluctuating prices of any commodity or currency heralds an irreversible movement or the demise of the US$.
Richard