Crude oil prices aren't yet as ``extreme'' as they were in the 1980s when adjusted for the purchasing power of U.S. consumers, Deutsche Bank AG said.``Oil prices would need to reach $145 a barrel for it to raise energy expenditures as a percent of U.S. disposable income to the levels that occurred in the early 1980s,'' analysts Adam Sieminski and Michael Lewis said in the bank's weekly commodities report today.
Crude futures rose to a record $111 a barrel in New York yesterday, having risen fourfold in five years. The weakening dollar has spurred investment in oil as commodities become cheaper for foreign-currency buyers. This relationship has played a ``stronger role in the psychology of both traders and OPEC ministers,'' the report said.
The correlation between currency and oil prices over the past year shows that oil prices could rise to $120 a barrel should the U.S. dollar index, a measure of exchange rates against six trading partners, fall to 70, Deutsche said.
The Dollar Index traded on ICE Futures in New York was 71.832 today, up from a record low earlier of 71.578.
``Relative to per capita income, crude oil prices would need to hit $134 a barrel to bring the purchasing power of consumers in the G7 to the level that prevailed in 1981,'' the report said.
When adjusted for U.S. consumer price inflation, they will need to rise to $118 to beat the all-time high level they reached in the early 1980s in real term , the report said.
Source: Bloomberg|By Maher Chmaytelli
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