Several postings ago I cited speculation and a weaker dollar were at least partially, if not mostly responsible for the recent spike in oil prices. Many colleagues, pundits, critics, and even treasury secretary Hank Paulson dismissed the idea that the weaker dollar was having an effect on oil prices. Since that time, Fed Chairman Ben Bernanke expressed concern that the weaker dollar was causing food and energy inflation and today ECB President Jean-Claude Trichet stated that the ECB will keep their benchmark lending rate at 4.00% and the ECB could raise rates as soon as next month.
The reaction was not surprising to me. Following Monsieur Trichet's comments the euro rallied sharply versus the dollar and oil rallied by $6.00 per barrel. Next time someone is stupid or dishonest enough to tell you that today's oil prices are purely a function of supply in demand, laugh in their face and walk away.
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