Ron Paul brought this article up briefly last night in the debates, but it's such a huge deal that I feel compelled to share it with everyone.
Oil prices finally hit $100 a barrel this week, albeit briefly, but breaking through that symbolic barrier is ominous and higher gasoline prices are sure to follow. Supply disruptions in various places and surging demand in China and India are part of the explanation for this decade's upward trend in oil prices. But perhaps the biggest factor has been largely overlooked: the decline in the value of the dollar.
Since 2001 the dollar price of oil and gold have run in almost perfect tandem (see nearby chart). The gold price has risen 239% since 2001, while the oil price has risen 267%. This means that if the dollar had remained "as good as gold" since 2001, oil today would be selling at about $30 a barrel, not $99. Gold has traditionally been a rough proxy for the price level, so the decline of the dollar against gold and oil suggests a U.S. monetary that is supplying too many dollars.
For those of you who need a clearer answer: Oil prices didn't really go up that much - the dollar just went down in value.
Clearly inflation isn't the only reason for skyrocketing gas prices since there aren't many other things that we buy that have tripled in price since 2000 (many may have doubled - CPI is up 82% since 2000), but it's certainly a big factor if it's reflected by both the Euro and gold.
