"Rapid changes in the price of oil and the impact of such price changes on economies around the globe have attracted considerable attention. In mid-2008 as the price of oil rose to unprecedented heights and then dropped sharply, the international exchange value of the dollar fell and then rose relative to a broad basket of currencies. For some, these two events seem to indicate a cause and effect relationship between changes in the price of oil and changes in the value of the dollar. Despite common perceptions that there is a direct cause and effect relationship between changes in the international exchange value of the dollar and the price of oil, an analysis of data during recent periods indicates that changes in the price of oil are driven by changes in the demand for oil that is different from the supply of oil, rather than changes in the value of the dollar. The rapid increase in oil prices in early 2011 reflects rising demand for oil and other commodities and uncertainty in global markets keyed to political turmoil in North Africa and the Middle East. This report analyzes the relationship between the dollar and the price of oil and how the two might interact. While the data do not support a strong cause and effect relationship between the value of the dollar and the price of oil, there likely are various channels through which changes in the price of oil and in the value of the dollar may be indirectly correlated."
CRS Report for Congress, RL34686