I certainly don’t want to jinx the excitement of what’s going on, but in monitoring a simple graph of the American Dollar versus European currencies like the British Pound (L) and the Euro (€), the American Dollar is on the rise. Since January 2006 the dollar has been in a steady decline of value. There is a lot of speculation at what causes are behind this rapid fall in the Dollar’s value (mine being high American corporate taxes), but Economics is not always so black and white. To give an idea just how bad the Dollar’s value became, compare the Pound’s value to the Dollar over the last five years. About .63L was equal to each Dollar at the end of 2004. A roller coaster was experienced between January 2005 and January 2007 (the Dollar’s top value found around January 2006), but by December 2007 the Dollar had fallen to a staggering .49L.
By analyzing the Euro a similar trend ensued over a 5-year trend beginning in October 2004, when the Euro was at its high around .90€. The most dramatic value change in the Euro began in January 2005 where it began around .75€ and climbed to about .85€ by January 2006, then fell consistently until about six weeks ago where it bottomed out at about .63€.
But in the last six weeks something has happened to swing around the values. The Dollar is up to .55L and .68€. This is about a 12% increase against the Pound and an 8% increase against the Euro. So what happened? I imagine economists can guess, but my belief falls into the court of the cost of crude oil. Oil reached its highest cost ever in June 2008 and has steadily declined over the last eight weeks. I am one who believes in fact the U.S. economy has become tied to the cost of oil primarily due to our dependence on oil. As prices increase we have to spend significantly more to keep our economy running.
Therefore some may suggest the government needs to control the price of oil, but rather my opinion is that we either need to supply our own oil (therefore giving a huge fall to the global price) or come up with our own energy alternatives (solar, wind, tidal, natural gas, etc.). My opinion is of the fact that we need to do both. It is well beyond the time that we should be anxiously engaged in drilling and identifying newer, cheaper solutions to energy independence. But I believe drilling is only a short-term answer, whereas the long-term answer is eliminating oil from the equation altogether through the introduction of other natural energy sources.


