Since US dollars is the
main currency used in the global oil market. The exchange rates between US
dollar and the currency of oil import countries affect the oil price a lot. If
Federal Reserve increase the interest rate which will make US dollar stronger,
it will force lots of oil export countries such as Russia increasing interest
rate too. All those interest rate changes will influence the global market like
the number of trades or difficulty of importing and exporting.
3 comments:
When the United Sates increases interest rates, it will have an effect on exports for oil rich countries. They will have to increase the price of their dollar to keep the exchange rate the same. If not, the amount of imports and exports will change between countries. This will have an effect on the many economies around the world.
Some may be concerned about how to interest rate will effect other economies, and we should be sure to make a well calculated decision in order to not capsize other economies. However, the fact of the matter is that the rate has to be raised. Although this will negatively impact some economies, it should strengthen the dollar more and bolster the U.S. economy. Seeing the domino effect of other countries raising rates simultaneously would be interesting tow watch.
I also agree that increasing rates in the US will have significant impacts on a lot of other economies around the world. In particular, I am curious to see how OPEC reacts to this change. If OPEC has to increase their prices to maintain their exports, it might actually help the smaller US oil companies who would at least be able to increase their sales, and try and recover from OPEC's decision of price declines to get the US companies out of the market.
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