In recent years rising oil prices have often coincided with a strengthening of the US dollar. A positive correlation means that oil imports priced in local currencies become more expensive for oil importers such as the euro area, adding to inflation dynamics. Historically, there has been no systematic co-movement between oil prices and the US dollar. However, recent studies suggest that a positive correlation might have become the new normal since the United States became a significant oil exporter. The empirical models presented in this box show that the structural change in the US oil market has not been sufficient to render the correlation between oil prices and the US dollar systematically positive. Instead, the co-movement observed continues to be largely the result of specific shocks that steer both variables in the same direction rather than the reflection of a structural change in the link between oil prices and the US dollar.
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