P.S. If that's the case I think we need to get off of that stuff. We left the gold standard for a reason. In my view it's unhealthy to peg your dollar to something. Physical things can be manipulated.Why do economist, wall street and others measure the health of the economy by the price of oil.?
The health of the economy overall is gauged by the price of oil because petroleum products are in, quite literally, everything. Demand for various petroleum products can be analyzed and conclusions drawn which lead to more analysis and insights and an overall picture of the economy eventually emerges.
The dollar is not pegged to the price of oil in any way. There is no oil standard. The price of oil is highly dependent on the value of the US dollar in the currency markets because it is priced in dollars, that's about the extent of the relationship.Why do economist, wall street and others measure the health of the economy by the price of oil.?
Oil and its derivatives are used in a wide variety of products, in addition to its use in transportation and shipping. Literally, nothing would run without oil.
Generally, the level of activity in the economy is tied to its use of oil. If there is more activity, there will be more products being produced and shipped. This makes it a simple proxy for overall economic activity. So you are correct that it is an essential commodity, and since it touches every aspect of our economy, it is a good gauge of the economy. There are other measures of the health of the economy that economists use, but they don't have the intuitive appeal of oil.
As to your P.S., I would agree that we need to reduce our dependence on oil. We do not produce enough to satisfy our own demand, and eventually, it will become harder to extract sufficient quantities to meet demand.
The oil is very essential for the day today activities right from cooking to aviation .
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