Tune Out OPEC's Bad Boys

OPEC's in-house hooligans Mahmoud Ahmadinejad of Iran and Hugo Chavez of Venezuela made waves at the group's recent summit by recommending that the global oil market relist crude in a currency other than the U.S. dollar.

Their claim is that the dollar's decline has eroded the effective value that oil exporters get for their product. Indeed, the dollar is trading at a record low against numerous currencies.

Europe's common currency has appreciated almost 70% against the dollar since late 2000. As the value of the dollar has fallen, any foreign entity accepting greenbacks has seen the buying power of the currency shrink.

However, the price of crude oil has risen by roughly 290% over the same time period. The jump in crude prices is partly due to rising global demand for the commodity. Another major cause has been the decline in the value of the dollar, according to a research report by Deutsche Bank Global Markets Research analyst Binky Chadha.

But David Knapp, oil markets senior editor at industry data provider Energy Intelligence, says the increase in crude has more than offset the sliding dollar. The euro has gained only about 16% against the dollar in 2007 while the price of oil has nearly doubled. "What are these people complaining about?" he asks.

From an economic standpoint, a change in the denomination of oil from the dollar to a basket of currencies or to an alternative single currency like the euro would have a negligible direct effect on global markets, says Dean Baker, co-director for the Center for Economic and Policy Research. The market for dollars and euros is so deep that enormous transactions between the currencies take place in seconds.