Oil is pricey because the dollar is cheap

In short, oil is dear because the dollar in which it's priced is cheap.

For background, it's worth mentioning that not long after he was inaugurated as our 40th president, Ronald Reagan predicted a fall in the price of a barrel of oil. What made Reagan so confident?

Aware of the historical relationship between gold and oil, Reagan deduced that oil was due for a correction based on a 20% drop in the price of an ounce of gold since his election. Sure enough, by December of 1981 the price of a barrel of oil was nearly 20% lower than it had been one year before.

Looked at over a longer timeframe, from 1970 to 1981 the price of gold rose 1,219 percent, versus a rise in the price of oil 1,291 percent. This wasn't coincidental. With gold and oil both priced in dollars, and with gold serving as the best proxy for the latter's value, a jump in the gold price neatly foretold the oil "shocks" of the 1970s that were merely dollar shocks.