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March 2008 |
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In the first quarter of 2008, despite increases over the last ten years, the real price of crude oil for the European Union is still 2 per cent below the 1981 record high; whereas for the United States, today’s price is 20% above the 1980 record high (graph 1).
As the price of oil is set in U.S. dollars, the fluctuation of the euro-dollar exchange rate alters considerably the impact of the oil price variations on either side of the Atlantic. In the past, the appreciation of the dollar against the European currencies which used to accompany oil price surges amplified their impact on Europe. Such was the case during the first half of the 1980s, after the second oil shock, and again in the year 2000. In contrast, since 2002, the depreciation of the dollar reduces the crude price increase for Europe.
Thus the present price level is not new for Europe, nor are the price developments over the last twenty years – similar to those of the 1960-1982 period (graph 2). However, the current pressing demand and the somewhat limited supply suggest that a drop in oil price comparable to 1986 is improbable in the near future. |
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Oil and the Dollar: a Two-Way Game, La Lettre du CEPII, n°250, November 2005 |
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Graph 1. Crude oil real price for the United States and the European Union (15)
Annual average 1960-2008*
2007 US $ per barrel |
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Graph 2. Crude oil price for the European Union (15)
1986-2008* compared with 1960-1986 |
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