ABSTRACT
The United States dollar serves both as a denominator for pricing crude oil and as a medium of payment between the oil-importing nations and the members of the Organization of Petroleum Exporting Countries (OPEC), then any movement in the value of the dollar against other currencies affects the real export earnings of OPEC. Any downward movement in the value of the dollar in the foreign exchange market results in an erosion of OPEC purchasing power making the OPEC imports originating outside the United States more expensive. OPEC as a Whole: In analyzing the sources of change of OPEC's terms of trade empirically we have considered the trade shares of OPEC with nine of the key industrial countries. These are: the United States, Japan, Belgium, France, Germany, Italy, the Netherlands, Switzerland, and the United Kingdom. Together these countries account for an overwhelmingly large proportion of OPEC's world trade.
