Comment by JumpCrisscross
2 months ago
> Oil is now being paid for using that system
The petrodollar hypothesis has been a myth since the 1990s. With America a net oil exporter, it’s an entirely stupid model to keep running.
2 months ago
> Oil is now being paid for using that system
The petrodollar hypothesis has been a myth since the 1990s. With America a net oil exporter, it’s an entirely stupid model to keep running.
I wish you would elaborate how being a net exporter relates to it being a myth. I don't see the connection. My point is that global trade of which oil is a major component needs to settle the books nightly. If the books aren't reconciled in an efficient manner trade has to slow down.
> how being a net exporter relates to it being a myth. I don't see the connection
Petrodollar a U.S. policy comes from the 1970s, when the U.S. guaranteed the House of Saud’s security in exchange for them selling their oil in dollars. The reason wasn’t to do some currency scheme, but to ensure the U.S. could always buy Saudi oil in a currency we controlled. Saudi Arabia then invested its profits in Treasuries, which closed the loop on Wall Street [1].
When America imported oil, keeping oil exporters close was strategically vital. Petrodollar recycling helped with that. Now that we don’t, it doesn’t.
> global trade of which oil is a major component
Like 4% [2][3].
[1] https://en.wikipedia.org/wiki/Petrodollar_recycling
[2] https://oilprice.com/Energy/Crude-Oil/Oil-Dominates-the-5-Tr... ~$1.5tn in 2021
[3] https://unctad.org/publication/global-trade-update-december-... 35tn in 2025
I see that as a side show to the overall banking system. I trying to express that this was a reactionary response to an immediate problem rather than a key part of banking.
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By forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing.
Also SWIFT being a means of control of movement of funds.
> forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing
If you give me one source, I'll break down why this is wrong.
(In case there isn't one, the U.S. dollar was never pegged to oil demand [whatever that means]. And nothing about petrodollar recycling thought about developing nations for one second.)
Hasn’t all recent oil purchases been settled using USD. My understanding is that most countries buy US treasuries to maintain US credit ratings and to settle global trade debts.
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