The price of oil has been falling again, today the price of West Texas Intermediate oil fell to under $41 a barrel, from $47 just ten days or so ago.

The superficial reason for the fall in the oil price is continued oversupply.

But another factor is at work.

Oil is priced in dollars, and when the dollar is riding high, the oil price tends to fall.

Sterling has dipped from 1.50 odd dollars to the pound before the referendum, to 1.31 on July 29th. The oil price has fallen from around $48 on June 23rd to $44 today. So it has fallen $4, but in pounds, it has gone from around £32 just before the referendum to £33.50 today.In other words, despite the oil price falling, when measured in sterling it has gone up.

Although the pound has suffered especially sharp falls since the EU referendum, the dollar has been up against many currencies in recent weeks. This is largely down to expectations that the Fed will be increasing interest rates soon, and as the dollar rises, the dollar oil price should fall. See Fed leaves interest rates on hold.

In the medium term, the oil price will surely shoot up again. It is the nature of the oil cycle. The count of active oil rigs has been registering sharp falls over the last 18 months. In January 2015, there were 982 active spinning drills bits outside of North America, now there are just 677.

It takes time for the oil industry to adjust to change in price, and these time lags stretch out the oil cycle, once the oil price does begin climbing back up, there will be a lengthy delay before supply rises, thus leading to even bigger price rises.