INTERNATIONAL HERALD TRIBUNE: NEW YORK: The price of oil rose Monday to nearly $104 a barrel after the dollar fell to a historic low against the euro, setting a record and exceeding the inflation-adjusted high reached in the early 1980s during the second oil shock.
Oil futures touched $103.95 on the New York Mercantile Exchange, topping the record set in April 1980 of $39.50 a barrel, a level that would translate to $103.76 a barrel at current values.
Oil prices are surging as investors seek refuge in commodities to offset a slowing U.S. economy and declines in the dollar.
Financial institutions, like pension funds and hedge funds, are also investing heavily in oil and other commodities as a hedge against a rise in inflation, analysts said.
That trend is expected to continue, especially after Ben Bernanke, the chairman of the Federal Reserve, signaled last week that he was ready to cut interest rates further to bolster growth despite rising consumer prices.
"When investors lose confidence in the central bank, they tend to look for hard assets," Philip Verleger, an independent economist and oil expert, said. "The Fed's capitulation on inflation is driving investors to commodities. The problem is there are no sellers. This means futures prices will keep rising." Oil prices near $104 a barrel as dollar falls to historic low against euro >>> By Jad Mouawad | March 3, 2008
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