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Relationship between US Dollar and Oil Prices
The positive correlation between oil prices and the US dollar index inverses, easing the burden on other countries.
Ari Kuncoro
International prices for various commodities including crude oil are generally based in in United States dollars. Historically, oil prices are inversely related to the strength of the US dollar (Verleger; 2023). For net oil importing countries, it provides a kind of partial compensatory effect that can reduce the cost of oil imports.
This inverse relationship occurs because the US had, for a long time from 1980 to 2020, been a net oil importer. Rising oil prices increase the value of oil imports so that the US has to increase the circulation of dollars in the world, thereby weakening the dollar.