Does the Washington Post Think the U.S. Exports Oil?

Dean Baker has some fun with an article written by Steven Mufson on the supposed effect of Federal Reserve policy on oil prices:

Let's try to write this so even a reporter can understand it. Oil is bought and sold in a huge market. The unit of account happens to be the dollar. This means that if the value of oil against all other commodities remains fixed, and the value of the dollar falls against other currencies, then the price of oil will be higher measured in dollars, and essentially unchanged in other currencies (there are some secondary effects - if oil is more expensive in dollars, people in the U.S. will buy less, which can make the price of oil somewhat cheaper measured in other currencies). The same would be true if oil were priced in euros, yen, bushels of corn, or gallons of peanut butter. There is no special importance to the fact that oil happens to be priced in dollars. So, let's get the story straight and stop confusing readers.

Dean Baker’s point is that currency of denomination is not the issue. But let’s take a look at what Mr. Mufson wrote:

Federal Reserve Chairman Ben S. Bernanke may have cooled off the credit crisis by cutting interest rates, but he may also have heated up oil prices this week. For seven consecutive business days, crude oil prices have hit new highs. Even after dropping slightly yesterday, crude oil on the New York Mercantile Exchange finished the week at $81.62 a barrel, up a third since Jan. 1 and not far short of the inflation-adjusted peak set in January 1981 … Lower interest rates have also undercut an already weakened dollar, which reached $1.41 against the euro. Since crude oil is priced in dollars, a weak dollar makes oil cheaper abroad and high prices in dollars more sustainable.

Mufson has the charts to demonstrate oil prices have risen and cites several factors that led to the increase in the market price besides the reduction in the Federal Funds rate. He then notes:

"In spite of the high [gasoline] prices, we have still seen growth in the United States," said Rob Routs, executive director of downstream at Royal Dutch Shell. He said that the United States has been importing about 1 million barrels a day of refined products

I guess Mr. Mufson knew we were a net importer of oil and not a net exporter. And I thought a dollar devaluation was supposed to increase world demand for our exports as it discouraged our demand for imports. The devaluation does matter as it impacts relative prices – but I think Mr. Mufson has his story a wee bit backwards.