Tuesday, April 08, 2008

Gasoline Price v. "Easy Al" Greenspan

There's an element in gasoline pricing which is under-played to an extent--and that is the value of the U S Dollar (USD.)

During the reign of "Easy Al" Greenspan, the USD spigots were wide open--largely financing a home-price bubble, but previously financing the dot-com boom.

Of course, when you flood a market with anything, that anything's value will decrease--precisely what has happened to the USD versus the Euro (or gold, or iron, for that matter.)

Since 1/2004, the USD has declined from .93/Euro to .65/Euro--about 29.5%. Were today's Milwaukee gasoline prices to be adjusted for that change, the price would be about $2.40/gallon.

No, the slide in the USD has not accounted for all of the runup in crude prices ($29.75 to $93.00/bbl) in the same time period.

But it certainly didn't help.

No comments: