Oil prices dipping, gas prices easing; does that mean economy is weakening?

May 17, 2012, Fairfax, VA—Americans for Limited Government President Bill Wilson today issued the following statement on the easing of oil and gas prices:

By the Obama’s account, recently he said that ‘as the economy strengthens, global demand for oil increases.’ So, now that oil and gas prices have eased, does that mean that demand is not as strong as everyone anticipated? Using Obama’s own metrics, does that mean the economy is now weakening?

“Contradictorily, Obama more recently suggested that the oil price spike earlier this year was the product of so-called speculators. He promised new regulations to ‘prevent market manipulation’. But at the same time he warned that ‘[n]one of these will bring gas prices down overnight’. So by Obama’s own account, his proposed regulations which never even took effect do not account for oil and gasoline prices dropping, either. Have the speculators suddenly stopped speculating?

“Why are prices now dropping? Obama’s tired worldview of mythical economic recoveries and speculator boogeymen cannot account for the real underlying cause for these rapid price bubbles: the weak dollar. When it appeared that the crisis in Europe had abated earlier this year, the euro strengthened against the dollar, the world’s reserve currency, and oil prices spiked up dramatically. Now that it appears the euro may collapse after all, the dollar has temporarily strengthened, and so prices have dropped.

“But the American people should take no solace in the chaos in Europe. The dollar is only ‘strong’ now in comparison to the weak euro. Should the euro collapse, there will again be a temporary flight to safety into the dollar, and oil and gas prices will continue to drop. But afterward, the underlying weakness of the dollar itself will again take hold, and inflation will ensue.

“If we as a nation wish to address these rapid price swings, we must address the strength and stability of the dollar. We need sound money.”

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at rrast@getliberty.org to arrange an interview with ALG President Bill Wilson.