Petrodler was founded in the 1970s after the US launched deals with Saudi Arabia and other OPEC countries. The contract was to settle oil transactions with prices in US dollars. The arrangement has secured a certain global demand for the US dollar. The system supported the economic domination of the US, but we may be nearing the end of Petrodler. The US dollar share of global reserves has declined over the past 20 years. Furthermore, there is a significant increase in countries that buy oil through local currency. Let’s discuss whether we are at the end of the reign of the dollar.
If the US dollar is falling, will the Petro Dollar end as well?
China is the world’s largest oil importer. The country also began a crusade against the US dollar. China is encouraging oil exporters like Saudi Arabia to accept the yuan for oil trade and settlement. China also uses the yuan to conduct oil trade with Russia.
India has also joined the bandwagon of the US dollar ejection. The country has begun paying for oil imports from the United Arab Emirates and Russia. President Trump recently imposed a 25% tariff on India on Russian oil purchases. India has issued a statement that it needs to curb its national interests. The country may continue to buy Russian energy in the near future.
There are also hints that Saudi Arabia is open to accepting yuan or other currencies for oil exports. If Saudi Arabia begins to settle oil trading in currencies other than the US, there may be a major change in global currency domination. The US dollar, and that, we may see its advantage halted.
Authorized countries such as North Korea, Iran and Russia are beginning to use alternative currencies for trade. Yuan and Bitcoin (BTC) have emerged as two candidates for the approved country.
The US dollar position is undoubtedly under threat, but it is unlikely that other currencies will take the greenback position anytime soon. Other currencies are not as fluid as the US dollar, and the dollar remains the global forex reserve currency.
