The impact of Value Instability of US Dollar on Demand for and Supply of Oil in the World Market

Various factors affect demand and Supply of oil in the market. However in this paper we try to study the impact of change in value of Us dollar in the market for oil. Today, the price of oil and its derivatives are nominated in terms of US dollar in international market. As a result any change in the value of Us dollar in relation to other major currencies would definitely affect demand and supply of many commodities including oil and its products. For example depreciation of US dollar in relation to Japanese Yen and (or) European Euro would mean, increase in purchasing power of these latter currencies for oil or decrease in real price of oil for these countries. This may lead to increase in demand of these latter countries for oil. In addition also, decline in the value of dollar would rduce purchasing power of oil exporting countries because most of their imports come from nondollar countries. In other words decline in the Value of US dollar would mean decline in oil revenue for oil exporters.