Why is the value of US dollar a function of the cost of gas?

Question

How come when the price of a barrel of oil goes up or down the value of the dollar does the opposite?

Answer 1

Because oil is the life blood of the US economy. As it rises, the US economy slows down. As it falls, the US economy booms. As such, people sell dollars when oil rises and buy dollars when it falls.

Answer 2

It's because oil is a component in almost each and every manufacturing and transportation activity that affects a product.

A loaf of bread is harvested by a farmer (tractor) as grain, transported to a silo or granary (truck), transported again (truck, barge, ship) to a processing center, beaten into flour (processing), shipped to a baker (truck), baked (energy), packaged and labeled (processing), shipped to a warehouse (truck) and delivered to the stores (truck).

It is then purchased and taken home (car).

That'ss a lot of oil. If oil goes up even a little bit, it has a massive impact on the cost of goods.

This causes industry to slow down, production drops, and with it, the value of America's currency. Without that production, the issuance of new American dollars outstrips what the economy is producing. Hence you have inflation.

When oil drops, production costs drop. Industry thrives, and there is more production behind the American Dollar.