Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Petrodollar on Shaky Ground; Saudi Arabia Willing to Discuss Selling Oil in Other Currencies

  by    0   2

In a recent interview, Saudi Arabia Finance Minister Mohammed Al-Jadaan said the country is open to discussing trade in currencies other than the US dollar. This could mark the beginning of the end of petrodollar exclusivity. That would be a huge blow to dollar dominance.

“There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal,” Al-Jadaan said in an interview with Bloomberg TV.

Al-Jadaan went on to say, “I don’t think we are waving away or ruling out any discussion that will help improve the trade around the world.”

Saudi Arabia ranks as the world’s largest oil exporter and the “petrodollar” serves as a crucial support for the US dollar.

Saudi Arabia has sold oil exclusively for dollars since 1974 under a deal with the Nixon administration. If the Saudis shift away from the dollar and sell oil in other currencies, it would be bad news for dollar dominance.

It’s not just Saudi Arabia supporting the greenback. The majority of global oil sales are priced in dollars. This ensures a constant demand for the greenback since every country needs dollars to buy oil. This helps support the US government’s “borrow and spend” policies, along with its massive deficits. As long as the world needs dollars for oil, there is guaranteed demand for greenbacks. That means the Federal Reserve can keep printing dollars to monetize the debt.

But if that demand were to suddenly disappear or even shrink significantly, it would be a big problem for the US economy.

ZeroHedge explained how the process works.

One of the core staples of the past 40 years, and an anchor propping up the dollar’s reserve status, was a global financial system based on the petrodollar – this was a world in which oil producers would sell their product to the US (and the rest of the world) for dollars, which they would then recycle the proceeds in dollar-denominated assets and while investing in dollar-denominated markets, explicitly prop up the USD as the world reserve currency, and in the process backstop the standing of the US as the world’s undisputed financial superpower.”

If the demand for dollars were to plunge, interest rates on US Treasury bonds would soar. This would be an untenable situation for a government servicing more than $31 trillion in debt.

And if Saudi Arabia were to begin pricing oil in other currencies, other oil exporters might follow suit.

China has been pushing for oil sales priced in yuan.

“We enjoy a very strategic relationship with China and we enjoy that same strategic relationship with other nations including the US and we want to develop that with Europe and other countries who are willing and able to work with us,” Al-Jadaan said.

While it doesn’t sound like the Saudis are prepared to totally jettison the dollar, there does seem to be an increasing likelihood the petrodollar could face competition for yuan, euros, and possibly other currencies. This is yet another sign that the dollar may eventually lose its status as the sole reserve currency.

401k IRA Rollover Free Report

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Is a Weak Yen Feeding the Global Gold Bull?

The gold price has been surging, with unprecedented central bank demand gobbling up supply. It has been a force to behold — especially as US monetary policy has been relatively tight since 2022, and 10-year Treasury yields have rocketed up, which generally puts firm downward pressure on gold against USD. 

READ MORE →

World Gold Council: “Blistering Central Bank Buying” Fuels Strong Gold Demand

Total gold demand hit an all-time high in 2023, according to a recent report released by the World Gold Council. Last week, the World Gold Council (WGC) released its Gold Demand Trends report, which tracks developments in the demand for and use of gold around the world. Excluding over-the-counter (OTC) trade, 2023 gold demand fell slightly from 2022 […]

READ MORE →

VIX – The Calm Before the Storm

The VIX, often referred to as ‘Wall Street’s fear gauge,‘ is currently portraying a sense of calm among investors, registering well below the 20 level. 

READ MORE →

Four States Consider Lifting Taxes on Precious Metals

Citizens of Georgia, Kentucky, Wisconsin, and Kansas may soon enjoy lower taxes on precious metals if recently introduced pro-metal bills are made law in 2024.

READ MORE →

Inflation Persists As Fed Signals Rate Cuts

printing pressThe U.S. Bureau of Labor Statistics (BLS) recently released two inflation reports highlighting inflation figures for December 2023. Here’s what they showed: 

READ MORE →

About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now