Aren't the cheap oil prices undermining the petrodollar as well?

TreasureHunter

TreasureHunter

Well-Known Member
I'm contemplating on the mid- to long-term effects of the cheap oil price. If it affects the rouble, it should also affect the dollar.

In the long run, the dollar should weaken if oil is cheaper.

Currently, there's high production, too cheap oil price, which means less dollars are required to buy oil. So, the demand for petrodollars is low. (Already low, as I earlier posted a graph on the forum).

Saudi prince says "oil will never be 100 $ again":
http://www.usatoday.com/story/money...audi-prince-alwaleed-oil-100-barrel/21484911/

I don't see how/why this wouldn't affect the US dollar negatively. The cheaper oil "weapon" used against Russia will backfire!
 
TreasureHunter said:
I'm contemplating on the mid- to long-term effects of the cheap oil price. If it affects the rouble, it should also affect the dollar.

In the long run, the dollar should weaken if oil is cheaper.

Currently, there's high production, too cheap oil price, which means less dollars are required to buy oil. So, the demand for petrodollars is low. (Already low, as I earlier posted a graph on the forum).

Saudi prince says "oil will never be 100 $ again":
http://www.usatoday.com/story/money...audi-prince-alwaleed-oil-100-barrel/21484911/

I don't see how/why this wouldn't affect the US dollar negatively. The cheaper oil "weapon" used against Russia will backfire!
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Good point It will be interesting to see want happens it might hold the USD back? I'm guessing that because Russia's two main exports are oil and gas it hurts them a lot more than the us has as they have a more diverse economy, also the us economy is pretty much the only economy that is performing reliably well these days, so people still want to use the USD as a hedge.
 
SovereignBuyerMelbourne said:
also the us economy is pretty much the only economy that is performing reliably well these days
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With respect, the US economy isn't performing well, it's probably performing less badly than most other major economies right now, which is leading to the demand/support for the USD.

IMO an economy that's performing well doesn't need key data being fudged, and is one that is growing at a reasonable rate with confident consumers. The US economy is staggering like a drunk down the back lane of a derelict city at the moment, with little to nothing on the horizon to look forward to.
 
Midnight Man said:
SovereignBuyerMelbourne said:
also the us economy is pretty much the only economy that is performing reliably well these days
Click to expand...

With respect, the US economy isn't performing well, it's probably performing less badly than most other major economies right now,
Click to expand...

Yeah that's much better put than what I said, I agree with you.

In fact I was reading at article the other day about us recoveries throughout history and the article was saying that this recovery is the slowest yet.
 
I wouldn't read too much into people saying $100 oil is never to be seen again. It wasn't so long ago that people were saying we would never see sub $100 oil again.

These oil prices will hurt the US but not as much as some of the other African and a few other (see Iran) producers who need $110+ to break even. It's hard to tell if their economies are linked enough into the world markets to gave a big effect but if Greece can cause problems...

What it does mean though is that rates are likely to stay low in the states to combat deflation and try and offset the job losses in the us pietro economy. If it really starts to act as an anchor in indexes you might even see some more QE, remember it will take a few months to see the lay offs and get official earnings reports which will have the low prices factored in.

You do have to worry a little about what this means for clean energy. When if your the sort that doesn't believe in climate change you can't deny that it could hurt how much silver might go into solar cells and electric cars.
 
The dollar is effected by far more than oil price. What is driving the U.S. dollar is complete lack of faith in Europe and some asian countries. The less confident, the higher the dollar.
The meltdown has barely began. Just wait until the dominoes fall in Europe when the Euro collapses and Greece leaves the common currency. The dollar will skyrocket.
On top of this, an enormous amount of money was borrowed in U.S. dollars from asian companies which is going to break many of them. This will cause an exodus from countries like Malaysia.
The U.S. dollar will also benefit from this.
Never forget that there are very few places that capital of such magnitude can be positioned. U.s. bond yields are collapsing as capital rushes to it, u.s. stockmarket is booming as capital rushes to it and the U.S. dollar booms as capital rushes to it.
When the u.s. bonds finally capitulate in time, u.s. stocks and tangibles such as oil and gold will shine.
 
^ Sure, the US has a more diverse economy than Russia, for example. But, we know - should the petrodollar system crash, the US dollar will implode.
 
I have been a firm believer that fracking has helped the US economy tremendously regarding jobs, GDP, trade deficit, etc., etc., etc. The decline in the fracking industry will hurt the US economy. But the US economy appears to be gaining momentum. Since about 70% of the US economy is consumer spending, the lower oil prices will compensate for the lost fracking jobs & revenues. The US is in an economic sweet spot right now and the stronger USD will help.
 
oil is trying to break free from the grip of the USD fingers, lucky oil is slippery :) but once the USD is on fire, oil better stay clear!!!

if you are running a CARRY trade, and trying to crash the YEN...then there is a need for a temporary store house for your ill gotten gain, in USD. before a better house is found like the YUAN or GOLD else where they are safe from the stinking fingers of those who controlled the sheeple.
 
Unfortunately auto and retail spending hasn't met expectations despite the extra money in people's pockets thanks to low petrol prices so the consumer economy isn't doing super well...
 
alor said:
oil is trying to break free from the grip of the USD fingers, lucky oil is slippery :) but once the USD is on fire, oil better stay clear!!!

if you are running a CARRY trade, and trying to crash the YEN...then there is a need for a temporary store house for your ill gotten gain, in USD. before a better house is found like the YUAN or GOLD else where they are safe from the stinking fingers of those who controlled the sheeple.
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So the Chinese government is less authoritarian than the US? Right...
 
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