rightly takes umbrage with Sarah Palin’s call for energy independence as the way to protect against the possibility that oil exporters will stop pricing their goods in dollars.
…finally, there is the oil price issue. A weaker dollar will mean more expensive oil for Americans, and that’s true whether or not oil is priced in dollars. If oil is priced in dollars and dollars become weaker, then the dollar price of oil must rise to ensure a steady price against other mediums of exchange (be they euros, gold, or moon rocks). If oil is priced in moon rocks and the dollar weakens, then Americans will pay more for oil because it will take more dollars to buy a moon rock. The effect is the same in both cases.
This also means that increased production of domestic petroleum sources will do little to address the problem, since the price of oil is determined globally. If America drills oil and and sells it in dollars and the dollar gets weaker, then markets will bid up the dollar price of oil. If the government forces producers to sell the dollar-denominated oil at a below market price, then America will quickly have no oil at all, as arbitrageurs will buy up the whole of American output and sell it abroad at the market price.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.