The recent drop in crude oil prices caught most of us by surprise. Many global forces affect the price of crude oil, but the primary factor lowering oil prices in the U.S. is the strong dollar. Crude oil will likely stay above $75/barrel over the winter as Americans turn on their furnaces, then weaken again in February or March when the ECB starts printing money to stimulate inflation.
The strong dollar and lower oil prices got me thinking about 1981-1985 when the dollar strengthened swiftly. Here is a chart of the dollar index:
Crude oil fell significantly during that period (crude oil adjusted for inflation):
This chart shows the long-term movements of the dollar, oil, and gold.
Today Bloomberg published a very useful chart of threshold barrel costs: