Although movements in the value of the dollar are one factor contributing to recent changes in the dollar price of oil, I do not believe they are the most important factor. Here I review some of the evidence that persuades me of this....
...The dollar has depreciated by 30% over this period while the price of oil today is 10 times what it was in 1999. Obviously something other than the pure inflation effect has been involved.
...Between January 1, 2007 and July 14, 2008, the dollar depreciated by 18%. If we take that most recent coefficient estimate of 1.76, the regression above would have predicted a logarithmic increase in the price of oil of 31%, or a move from $61/barrel in January 2007 to $83 in July. In fact, oil peaked at $145 on July 14. Since, then, the dollar has appreciated by 5.9%, while the price of oil has fallen by 23%....MORE