Saturday, January 10, 2015

Who's better off, US consumer or European consumer?

Which consumer is better off due to the drop in oil prices, a person in the USA or a person in Europe?

Since the start of the summer oil prices have dropped from $105 to under $50.

At the same time, the US Dollar has strengthened significantly against the Euro.


The price of oil is expressed in US Dollar terms.  Thus from a European perspective, the strengthening dollar has reduced the degree of drop in oil prices from the Euro perspective.  For the US consumer the price of oil has dropped 53%, while for the European consumer it’s dropped just 46%.  If you’re a US consumer thinking about a trip to Europe, with a little more spare change in your pocket and the US Dollar stronger than it's been in seven years, now might be a great time to go.

Dollar chart from www.oanda.com/currency/historical-rates/
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