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End of the U.S. Dollar

Tectonic events are occurring in the world that are worth noting. The projected death of the petrodollar has been ongoing for several years now and may be gaining steam with the current situation in Saudi Arabia. Some are predicting the collapse of the petrodollar to occur in the second half of 2018. What this will mean for oil in terms of the U.S. dollar is that oil will likely be priced higher, much higher, and cause an upheaval in the financial markets.

Origin and importance of the petrodollar

In 1971 Richard Nixon was forced to close the gold window taking the U.S. off the gold standard and setting into motion a massive devaluation of the U.S. dollar. In an effort to prop up the value of the dollar Nixon negotiated a deal with Saudi Arabia that in exchange for arms and protection they would denominate all future oil sales in U.S. dollars. Subsequently, the other OPEC countries agreed to similar deals thus ensuring a global demand for U.S. dollars and allowing the U.S. to export some of its inflation. Since these dollars did not circulate within the country they were not part of the normal money supply, economists felt another term was necessary to describe the dollars received by petroleum exporting countries (OPEC) in exchange for oil, so the term petrodollar was coined by Georgetown University economics professor, Ibrahim Oweiss.

  • Preparing for the Collapse of the Petrodollar System, Part 1. In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. ...By 1975, all of the OPEC nations had agreed to price their own oil supplies exclusively in U.S. dollars in exchange for weapons and military protection. This petrodollar system...created an immediate artificial demand for U.S. dollars around the globe. And of course, as global oil demand increased, so did the demand for U.S. dollars. As the U.S. dollar continued to lose purchasing power, several oil-producing countries began to question the wisdom of accepting increasingly worthless paper currency for their oil supplies. Today, several countries have attempted to move away, or already have moved away, from the petrodollar system. Examples include Iran, Syria, Venezuela, and North Korea.
  • xxxxx. History of Peak Oil and The Petro Dollar. Duration 9:29. Explores the raw facts and truths behind the history of oil and the hegemonic agenda of the monopolistic energy Industry.
  • Gold and the Petrodollar explained. Duration 14:45. A detail presentation of the history of the petrodollar from the early 1970's to the end of 2015.

China takes aim at the petrodollar

China continues to extend its financial interests around the world. As the largest importer of oil in the world (at nearly 9 million barrels a day or 25% of the world's oil production), China has lately been trying to persuade Saudi Arabia, OPEC's kingpin, to start accepting yuan (i.e. Chinese currency) payments for oil. In financial circles this is being called the petroyuan versus the petrodollar strategy. With the recent events occurring in Saudi Arabia, this strategy may soon become a reality.

  • China will bully Saudi Arabia to trade oil in yuan - Russia already agreed... Petrodollar RIP. Duration 2:08. See also: China Takes Aim At The Petrodollar. “I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it—as the Chinese will compel them to do—then the rest of the oil market will move along with them,” Weinberg told CNBC this week. "Moving oil trade out of dollars into yuan will take right now between $600 billion and $800 billion worth of transactions out of the dollar,” the economist noted, adding that the yuan oil trade would also mean stronger demand for Chinese securities, goods, and services.
  • Petro-yuan vs. Petrodollar. Duration: 8:30. The interview with Chris Marenson is in first part of the program.