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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: edamo who wrote (25671)	12/19/2000 10:37:53 AM
From: SGJ	Read Replies (2) \| Respond to of 65232

Edamo, again with all due respects I have never heard your explanation of oil pricing. It interests me because it feels like Kantian logic. You state reasons that lead to an opposite reality. You state that if the dollar falls, oil prices rise and I say that this would be difficult to prove. You state there is a factor for currency conversion and that its in the OPEC charter but don't state what it is. If there is one, it is not important as the major OPEC producers convert immediately to gold. Then you move on to the amount of oil produced on the European continent and state thats why they don't want Oil priced in Euros. In a macro global economy the currency index standard for Oil pricing doesnt matter. The truth is that for the most part oil is traded for gold. That is what the Arabs take in, not currencies. ITs not a dollar/euro/oil equation, but dollar/gold/oil. The Arabs sell the oil for dollars then purchase gold. They hold no foreign currencies. The current strong dollar, cheap gold, expensive oil equation has them in high cotton. Your response focuses on producing countries, but my point was mainly with respect to the effect on the consumer. So, to get you back on track here, currency conversion visavis the dollar increases oil prices for consuming countries with weaker currencies and lowers them for consuming countries with stronger ones. I don't dispute that multinationals have experienced treasurers who are adept at hedging currency. Again you focus on a different area of the subject. Hedging only works on currency conversion (micro) not the overall negative effects of a weak currency on an economy (macro). A slight weakening of the dollar to the Euro will firm up the consumer side of the Euro economy, which will provide a marginal growth factor.