When your currency is trending down everyone wants to get into the act of forecasting. The latest dollar forecasters are the presidents if Iran and Venezuela at the OPEC meetings this week-end which overshadowed the G20 summit in South Africa.
“They get our oil and give us a worthless piece of paper,” Mahmoud Ahmadi-Nejad, Iran’s president said. “We all know that the US dollar has no economic value.”
“The dollar is in free fall, everyone should be worried about it,” Mr. Chávez told reporters here. “The fall of the dollar is not the fall of the dollar — it’s the fall of the American empire.”
Mr. Ahmadinejad said that oil, which was hovering last week at close to $100 a barrel, was being sold currently for a “paltry sum.” And Mr. Chávez predicted that prices would rise to $200 a barrel if the United States were “crazy enough” to strike at Iran, or even at his own country.
“OPEC should set itself up as an active political agent,” Mr. Chávez said, addressing about 1,000 guests in a conference center by the royal quarters.
While these comments were dismissed by the moderates in OPEC, the dollar talk forces the discussion of pricing of oil in dollars. While there is not a desire for OPEC to change pricing policies, the talk of the UAE to switch away from a dollar peg should be concerning for the US. The dollar decline has been less of a major issue for US oil imports because it is priced in dollars. The real price would be ten percent higher if it was priced in euros. Of course, the rising cost of oil for countries with appreciating currencies has been blunted.
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