Everyone, from the man on the street to the major candidates for political office, are wondering what we can do about gas prices. They say there's no short-term fix. They propose drilling off the coasts and in Alaska all of which would take 5-10 years to deliver any oil. They propose sweeping changes to the way we make cars, all of which would take years for the re-designing, testing, and re-tooling. No one brings up the quickest fix...

Strengthen the dollar. The value of the dollar against foreign currencies has dropped 30-50% over the past few years. In 2003, the Euro was worth as little as $1.12. Today it's worth over $1.56. If the dollar was as strong today as it was when the Euro was worth $1.12, that $133.60 per barrel for gas would be $95.91 a barrel, and if gasoline moved apace, that $4.17 per gallon gas would be $2.99.

Yes, we need to rein in the speculators and bring these markets out into the light of day to prevent manipulation, but the quickest way to fix things is to strengthen the dollar against foreign currencies. That will bring down the prices of all imports, not just oil, lowering prices at the pump and at the supermarket.

An immediate way to strengthen the dollar is if the Fed raises interest rates. They say that it will slow economic growth, but look at what the cost of oil is doing to inflation, consumer confidence, and a number of other of major economic drivers. Lowering the price of oil by strengthening the dollar will do more good for the economy than the interest rate boost will do harm.

In short... stronger dollar = lower gas prices. Why isn't this being discussed with the fervor that offshore drilling is?

This entry was posted on Friday, June 20th, 2008 at 1:03 pm and is filed under Politics & Religion, World Affairs. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.