The Triffin Dilemma on a Russian Perspective. The Fixing of Oil Price: Dollar, Euro, Ruble or SDR
Robert Triffin International, Centro Studi sul Federalismo, November 2017
Commodities are currently quoted in US dollars. Their prices move accordingly to a wide range of variables linked to the real economy (demand and supply). The existence of big and liquid future commodity markets also plays an important role in the formation of commodity prices, driven by general macroeconomic outlook rather than commodity-specific factors. On top of this, the fact that commodities are priced in US dollars makes the exchange rate of the US currency a variable that affects the price of commodities itself.
For example, in general, since 2000 onwards an appreciation of the US dollar has been accompanied by a fall in the oil price. On the contrary, a devaluation of the dollar usually tends to reduce the price of crude oil in consumer countries. This, however, leads to an increase in real income and demand, hence, even if delayed, in prices.