How Reagan Cut Oil Prices And Why It Won’t Happen Now

A Weak Dollar, Not Oil Company Greed, is Driving Prices Up

Editorial
Investors.com
4/5/2012

Energy: Governments aren’t powerless to slash the price of oil. Ronald Reagan and Paul Volcker once did exactly that. But it took a kind of commitment not in sight today.

Among all the factors pushing up prices at the gas pump, the weakness of the U.S. dollar is one of the most important and least discussed. Ultimately, supply and demand set the price of oil, gasoline and all other sources of energy. But the fact that oil is priced globally in dollars also has consequences for American consumers.

When the dollar buys less, Americans pay more for oil. And right now the dollar is weak, its buying power diluted by easy money and huge budget deficits.

A look at the indicators of dollar strength and crude oil prices in recent years tells the story (see chart). As measured by the Federal Reserve’s broad Trade-Weighted U.S. Dollar Index, the dollar was strong in the late 1990s and early 2000s. Oil prices throughout that time had their ups and downs along with the global economy, but they were well in check….

The editorial continues at IBD.

Related: Egan Jones cuts US rating, cites high debt load

Credit rating agency Egan-Jones has cut the United States’ top credit ranking, citing concerns over the country’s high debt load and the difficulty the government faces in significantly reducing spending.

The agency said the action, which cut U.S. sovereign debt to the second-highest rating, was not based on fears over the country not raising its debt ceiling.

Instead, the cut is due the U.S. debt load standing at more than 100 percent of its gross domestic product. This compares with Canada, for example, which has a debt-to-GDP ratio of 35 percent, Egan-Jones said in a report sent on Saturday…

 

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