Comment by 0xbadcafebee
21 hours ago
This is the US trying to salvage the petrodollar. They want those t-bills and oil priced in dollars to maintain reserve currency status, but the whole world is divesting anyway. UAE is hoping that by leaving OPEC they can continue to do business and get protection from US. But US isn't gonna risk a larger war just to defend UAE, US has plenty of oil to exploit in Venezuela and at home. So UAE is just kinda screwed, and petrodollar will become north-american-petrodollar. My guess is it'll happen by Q1 2027
I’ve developed a simple heuristic: If someone unironically invokes petrodollar as an explanation for anything in 2026, they’re probably not worth taking seriously.
Financial Times: "There’s no such thing as the petrodollar"
https://www.ft.com/content/be345914-7b4b-4264-bcbd-6e5e33b79...
https://archive.is/4rn8t
I am personally convinced that there are many more people pretending to understand geopolitics than people who actually understand. It could be that no one truly understands due to the amount of fractal complexity and emergence.
seriously. instant indicator that their world view is irreversibly warped by tiktok politics.
The petrodollar and petroeuro is misunderstood. The real point: These oil/gas exporting nations don't have enough investable assets in their own nations. As a result, they need to invest overseas. For a long time, the best places to invest this excess capital in the world were/are North America, Europe, and Northeast Asia (Japan/Korea/Taiwan). If you want to say that petrodollar or petroeuro is doomed, what will replace it?
It's not that the petrodollar is doomed, it's just 'devaluing'. The US isn't a stable, safe place for cash anymore. But the world still needs massive amounts of safe cash. So there really is only one alternative: diversify.
They'll diversity into Gold, rare-earth metals (they're only getting more important), CIPS, Yuan, Euro. That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. And once they're all divested, the diversification will add risk and losses. Can't be helped though, they still need security. So we're looking at a generation of slow global decline, probably propped up slightly by the industrialization of AI (which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"). China is the real winner, because all they need is oil, and their partners will make sure they get a steady supply (because it's in their partners' interests; that's what having allies is all about).
US can't stop this; their military isn't equipped to fight wars on multiple fronts, their lumbering, expensive weapons can't be sustained in a protracted conflict, their wars aren't popular at home, and they don't have the manpower. Even when they eventually start the draft back up it'll take years to build up their warfighting capabilities, and by then the world will have diversified enough that they can take the hit. (The US will try a World War anyway to try and retain the Empire, because their leaders are psychotic morons and their people are compliant, but they'll still lose. (Historic parallel: Sparta. Great military, but tiny, so most of their power came from wealth and tenant states; eventually the rest of the mediterranean got tired of their shit (installing dictatorships, alienating allies) and their empire died. Hell, even their Navy was paid for by Persia - foreign investment used to weaken rivals via proxy war))
I don't think this is avoidable. Nobody trusts the US now. The divestment has already begun. Countries aren't suddenly going to change their minds - even if Trump doesn't overthrow the government to cement this new status quo in 2028 (which he 100% will), the next President could be another Trump. Nobody wants to be subject to their insane policies (foreign & fiscal) anymore. So the US isn't a secure place for cash. Nations aren't just going to shrug and ignore it, they're going to act to protect their interests.
To be honest this comment kind of reads like anti-US fanfiction.
>That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else.
These are huge jumps in logic, I'm not even sure where to begin. I guess the most glaring question is: If other countries are actively diversifying from US assets as you claim, why would they still be so hurt by a US financial market downturn?
>And once they're all divested, the diversification will add risk and losses.
Since when does diversification ADD risk, and how would losses be incurred?
>which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"
Also a huge claim to make. You'll find plenty of people who want the best models and are pretty price-insensitive, especially among those who get the most economic value out of AI.
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Coincidently, FTAV posted a good "petrodollar" article today for anyone interested (article is free but might need a free account to read it): https://www.ft.com/content/a65efb54-306b-49ad-9920-40d59b195...
Wow, this is a great share. I am regular reader of FTAV. I highly recommend it to others here.
I like this part:
And:
A lot of online armchair analysts miss the fact that the Euro is just as important as the US Dollar in global trade. The Eurozone has a combined GDP of about two thirds of the US. That is huge! And they Eurozone does lots of trade with countries outside the Eurozone, so the Euro is a vital part of the global economy. The number one forex pair globally is EUR/USD. It is trivial to convert between the two (tight spreads, giant order capacity), so buyers and sellers are fine with either.
It does seem like the petrodollar is coming to an end. Even if we wanted to keep killing/abducting the leader of every tiny oil nation shortly after the decide to sell oil in another currency (like we did to Iraq, Libya, and Venezuela), bigger ones we can’t just do that to practically are going to start.
The writing is on the wall. It might take decades, but it’ll end.
> it'll happen by Q1 2027
Which month?
Petrodollar discourse tends to annoy me because people tend to get cause and effect confused.
The dollar isn't strong because oil is traded in it. Oil is traded in dollars because the dollar is strong. What makes the dollar strong? The US military and, at least up until now, the US essentially guaranteeing global maritime trade. Oh and the US also being the world's arms dealer. Why this is such a huge strategic blunder is because the US has proven itself unable to militarily open the Strait of Hormuz. This should surprise precisely no one. The Joint Chiefs knew it. The Intelligence community knew it.
Let me put this another way: you could make all oil trades in euros tomorrow and pretty much everyone would still hold dollars and convert to euros as needed. People don't understand this so you get silly conspiracy theories around, say, the Iraq War being started because Saddam Hussein was starting to trade oil in euros.
Let me give you a concrete example of this all in action. Iran has threatened to charge tolls to pass through the Strait and they wanted to be paid in crypto, largely to avoid having their funds frozen (as has already happened) because the US has that kind of control over the financial system. But that's still a problem because all US companies and any financial institution that wants to main access to the global financial system isn't legally allowed to trade with Iran, even in crypto. My point is that all of this could be traded in crypto and it wouldn't matter. The "petrodollar" would still rule.
You say "people tend to get cause and effect confused" and then unironically follow that up with:
> What makes the dollar strong? The US military
The US military and the dollar are strong because the US economy is strong.