I'm not sure this makes any sense - there's no benefit to using USD for the pricing if the contract is settled outside the US, and there are RMB-denominated oil futures available. Ironically as a result of sanctions on Iran, which isn't allowed to trade oil through any institution connected to the US. https://www.cnbc.com/2018/05/16/iran-oil-trumps-sanctions-cr...
One can argue that cheap and easy access to oil was a reason for wars, sure.
But the USD is the world’s reserve currency. There’s no need to start a war over any attempt to pay in another currency - the money all ends up converting to USD anyway. It’s just such a minor thing in the scheme of things that no one is going to war over it.
I mean, Trump pulling out of the Iran deal has done more to promote non USD settlement than anything else. But no one really cares about the settlement aspect there.
Saddam threatened to and had plans to move to the Euro from USD for oil reserves. Saddam was assassinated.
Gaddafi had plans to develop a gold backed African Union currency and he was assassinated.
I'm not one for conspiracy theories but I am suspicious of "coincidences" in geo-politics that always end up favouring the same actors (when there is accompanying proven motive to boot).
Sure, if you are a brutal dictatorship already and try to upset global financial markets, after a multiyear struggle with the leading military power, while having a huge homegrown resistance... then you might get assassinated.
It is not a coincidence, but it is also not simply because of just one thing.
Saddam Hussein wasn't assassinated. He was captured, tried, and executed by other Iraqis. We can argue about the legitimacy of Iraq's criminal justice system but that's far from being an assassination.
Precise language matters. You could loosely state that any war in which the losing head of state ended up dead was an "assassination", but that's not what the word actually means.
I see "assassination" as "killing a particular person as a political move" - Iraq and Libya were very long-winding paths to get a particular person killed. But I agree it is somewhat imprecise in that it was not the CIA that ordered the angry mob on Qaddafi, he wrote those circumstances himself.
The US had a multi-decade plan to take Saddam and Gaddafi out the instant we could get away with it, for a whole host of reasons, and the dollar-denomination thing is like #15 on that list at best.
Some euros or RMB becoming dollars for 5 seconds before they become oil is just not that big of a deal.
So if it wasn't to maintain the status of the USD as the reserve currency which other reasons did the US have to invade? Apart from wanting to construct an oil pipeline through Iraq I'm not aware of any other reasons?
There is absolutely not a shred of evidence that the US has invaded anyone over the petrodollar.
It makes no sense in any geopolitical construct.
It's about on par with Obama being from Kenya.
Starting a war is a huge thing requiring a lot of political momentum, and almost nobody in the White House ever even knows what 'petrodollar' really is, they have no instinct for why it's important for America, and there are zero Treasury officials or folks from the Fed running around saying 'let's invade' over this or that.
The list of 'usual reasons' for invading Iraq and Libya are all in public domain by now - we know the things that Bush, Cheney, Obama etc. have talked about, we know their reasoning.
There is ZERO talk of petrodollar among them - ever - for any
reason, because it's irrelevant.
Military Generals sometimes fret about national security but there are ZERO instances wherein they'll talk about the petrodollar they have no idea even what it means.
The reason that most countries price in Oil is because it's very convenient to do so.
Do you think Saddam Hussein wants worthless Chinese RMB? What's he going to do with that currency? Send it to Germany to buy factory equipment? No. RMB is worthless outside of China. So what then? Pounds? Pesos? Aussie Dollars?
The only currency that could remotely be considered are Euros, but then, what's the point? Because USD are still superior and you're going to have to trade for them anyhow.
Yes, America gains somewhat from the petrodollar - and yes, they will lean on people and strong arm to keep people in check, but nobody has ever invaded anyone over currency pricing.
Historically there have been a number of attempt to develop markets for oil in non USD currencies. The USD remains the biggest because - basically - of network effects.
If the US is the largest producer, no matter the currency, wouldn't the US rake in the most cash?? It could be in other currencies which would have to be converted anyway...
Having the dollar serve as the world’s reserve currency has been a major subsidy to both the U.S. government and to Americans. Foreign governments and central banks are more likely to buy U.S. government debt, which allows the U.S. government to spend more money and run up deficits with a lower interest rate. The two biggest foreign buyers of U.S. government debt come from the governments of Japan and China.
This has also been a major subsidy to Americans.
In addition to foreign governments using dollars and buying up U.S. government debt, many immigrants in the U.S. will take dollars in the form of cash and send the currency to relatives in other countries. This actually serves as a deflationary effect, as it makes consumer prices cheaper for Americans in the U.S.
> Foreign governments and central banks are more likely to buy U.S. government debt, which allows the U.S. government to spend more money and run up deficits with a lower interest rate.
Foreign government hold US debt because it's a safe store of value. America can access cheap debt because it has good credit. If oil was traded in another currency for some reason those countries would still buy US debt.
> This actually serves as a deflationary effect, as it makes consumer prices cheaper for Americans in the U.S.
Deflation isn't desirable firstly. Secondly, the federal reserve controls the money supply so more demand doesn't matter as the federal reserve will just decrease interest rates to maintain 2% inflation.
It's amazing how prevalent conspiracy theorists are among people on this website. Also fyi, the amount of demand the Saudis have for the USD is a small percent (maybe a fraction of a percent) of global demand for USD. So Saudi Arabia deciding to trade oil in a different currency would have 0 effect on the US.
> Foreign government hold US debt because it's a safe store of value.
US debt is a safe store of value, because cheap energy can only be obtained by paying in US dollars. If you remove that motivation, the USD is just another fiat currency.
> US debt is a safe store of value, because cheap energy can only be obtained by paying in US dollars.
haha ok, I don't even know how this statement makes sense in your head. It's like you believe the only reason the US economy is successful is because of oil being traded in USD. Ignore the mega corporations and the giant military.
It’s a myth that people “needed” saudi oil. Men are greedy and will use any justification to satiate their greed. It is up to you to accept the justification or not.
They’ll get a pass until oil doesn’t matter or the water runs out and it’ll all be irrelevant very shortly thereafter. Saudi Arabia’s long term future is no brighter than Yemen’s. If any of the Arab petro-states make it it’ll be the UAE and that’s borderline.
I think the general perception is that the region doesn't have anything valuable to export once the oil is gone. They're trying to import scientists and engineers to kick off an economic transition, but those types of people will have zero interest in being in the region once the oil runs out, and the more educated amongst the local populace would leave too. It is already widely held (again, I don't have numbers for this) that the rich/powerful/educated have already secured real estate in other places should instability arise, meaning those people with means or skills would leave once the oil runs out, meaning they don't see a bright future in the region as well.
With the recent news articles about the journalist being killed, all of the "modernization" thoughts people had are totally gone. There has been a lot of money thrown into architecting a modern image - all of which was completely undone in one single news cycle.
I am no expert on the region though, just fielding some thoughts.
They have tried some moves but they can't break from the fundamentalism making their efforts pretty moot despite all of the money they throw at it. Mystifyingly they were clearly involved with getting a Sex and the City movie set there. They could have reformed to be a productive post petrol economy but I suspect it was too late even before they decided acting like mob hitmen against journalists was a good idea. You can influence media with money but murdering journalists gives them self preservation reasons to refuse to deal with you at all.
Apparently there is a pessimism / old joke there paraphrased as grandfather rode a camel, they drove a jeep, their children drove ferraris and their grandchildren will ride camels.
I can't work out whether the recent fashion for misusing (or at least generalising) the term "nation state" is just people trying to sound clever (and failing badly), or whether there's something more sinister behind it, perhaps some kind of neo-racism, something along the lines of: if you're an X-ian then you are automatically responsible for anything that an X-ian government agency does, even if the X-ian parliament was never told about it, let alone the general population of X-ia. It's probably just people trying to sound clever but when terminology is changed I'm curious about the reasons.
I don't think you are a nazi. I do find it amusing that there are many here who often push the idea that "group of people X's behavior must be collectively honored and respected" yet also push "group of people Y's behavior must be collectively punished".
Also, real Nazis would definitely consider people as members of a group and not as individuals.
> Arab petro-states are not the only nation states in the region.
They’re the only ones I expressed an opinion on though. In the Arabian peninsula they’re a majority by population and in numbers. There are no non-Arab states on the peninsula at all. Which of Saudi Arabia, Bahrain, Qatar, the UAE, Kuwait and Oman do you see having a bright future?
The Trump regime is salivating at the idea of removing all restrictions on fracking. He could also easily switch alliances away from KSR by easing sanctions on Iran and Venezuela. The gap is negligible given those two potential scenarios.
A side-effect of ending our persecution of Iran, however, is that Putin would likely start a war. If Iran were allowed to dump their vast natural gas supplies on the open market, Russia's economy would starve.
>A side-effect of ending our persecution of Iran, however, is that Putin would likely start a war. If Iran were allowed to dump their vast natural gas supplies on the open market, Russia's economy would starve.
No, he wouldn't. Russian establishment has no balls for that, Russian regime was already in survival mode by the end of Putin's first presidency. All they want now is to be left alone with their puny savings from days of abundance, and to die before their money run out.
Their expansionist ambitions? A bluff, a diversionary manoeuvre - plainly and simple.
That's why the Saudis have for a long time extended their business, investing heavily in real estate and what have you. Oil will be gone in 100 years, the skyscrapers won't.
The skyscrapers in the desert mean absolutely shit, though. Likewise man made islands that disappear without constant care.
Those are not investments.
Using money to make more advanced development possible, that's investments. The Norwegians got it right IMHO - they put all their oil money back in the economy, and they are punching now way above their weight! They have about 1% of the EU population, but own about 10% of EU Companies through their investments. Bar any major catastrophe, or very stupid decisions, they will have a good life for generations to come, regardless of their oil futures.
In the a similar way as current generations look dimly on wealth gained by stealing land from indigenous populations, or on wealth gained from cutting down almost all old growth forest, I presume.
I'm pointing out that people who are very well off tend to criticize the culture that provides them with the comforts of modern life while being oblivious about the benefits of their culture which they enjoy. I made no claim about other kinds of people.
Agreed. The Saudis have been snatching up real-estate all over Europe, America, and the middle-east. KSR is the largest foreign investor in Turkish real estate. If you remember the Gezi park protests, they were more about Saudis and Qataris forcing unwanted conservatism on the Beyoğlu city of central Istanbul than it was about saving the park.
The average Türk, except for the very upper-class, would be very happy to end the influence of the Saudis in their country.
Nothing has changed about the world's demand/need for Saudi oil, it's near record highs.
It's true that between its domestic production growth and Canada, the US could just about painlessly replace Saudi oil imports if it were necessary (1m barrels imported per day from Saudi in 2017). The US should add another million barrels per day in production over the coming year.
Saudi Arabia's production plunging (eg due to a revolution or embargo), would legitimately crash the global economy. China, India and Japan (three of the five largest economies) heavily depend on their supply.
Maybe in another ~25-30 years Saudi Arabia's oil won't be very necessary for the global economy, assuming electric vehicles make enough headway.
>Saudi Arabia's production plunging (eg due to a revolution or embargo), would legitimately crash the global economy. China, India and Japan (three of the five largest economies) heavily depend on their supply.
No, it wouldn't. Prices and taxation regime will simply adjust. Proof? Last decade prices were hitting $130+, yet nobody died. Price of air travel have plummeted last decade, and been going up since then, despite kero getting cheaper! And so did many other fuel cost sensitive industries.
There were a bunch of oil development projects that started up 10 years ago at $100+/barrel prices which were put on hold. IT is surprising how quickly they can be brought online.
Last time the oil price peaked we saw how effective technological change is at opening new fields and techniques.
There is also a whole bunch of Russian and deep offshore fields which become economical at high prices too.
Perhaps now they don't need to be the West's principle ally in the region, or given a free pass on every human rights abuse.