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Because oil prices and the dollar have moved in opposite directions, the increase of oil expressed in euros instead of dollars has been less pronounced than the oil price increase in dollars.
Oil producers sell their products in dollars. These dollars are used to purchase other goods in international markets. As the dollar lost its value starting in 2002, oil producers could afford to buy less in international markets with their dollars. To compensate for this loss of buying power, they may have raised the dollar price for oil. As a result, while oil prices in dollars rose by 162 percent from their low point in beginning of 2002, they climbed by less than half that rate measured in euros, 77 percent. At that rate, oil prices would have only risen to $34 per barrel in October 2004, instead of the actual $52, without changes in the dollar?s value.
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