Petrodollars? Help!

Fatherof4 · Tar Sands Joined: Aug 18, 2004 Posts: 79

Anyone here have enough understanding of the concept of petrodollars and how a move to pricing oil in Euros would affect the U.S. economy. I've read that the threat of Iraq deciding to price oil in Euros instead of U.S. dollars was a major motivating factor in the invasion.

If you understand it please explain like you are talking to a 10 year old, so I might have a chance of understanding it too. Thank you. Shocked

Fatherof4 · Tar Sands Joined: Aug 18, 2004 Posts: 79

Ok... I'm reading the thread The Euro vs. The Petrodollar... I'll post there with my questions.

http://www.peakoil.com/fortopic1545.html

savethehumans · Light Sweet Crude Joined: Oct 20, 2004 Posts: 1541

Father: the basic point can be understood by a FIVE year old, actually:

Currently, the only currency in which oil can be bought is the dollar, thus the term PETROdollar. Knowing they have the world by the tail, the US has totalled up more international debt than could ever be paid back if the bill comes due. Since the world needs dollars, the bill has never come due...until, perhaps, now.

Moves are being made by the EU, Russia, China, Japan, et al, suggesting that oil be bought by euros, yuan, yen, et al, as well as the dollar. If this happens, the dollar will not be so desperately needed by the whole world. Thus, the debt bills can be made due. Unpayable, the dollar, and the dollar economy, would totally collapse. It will affect the rest of the world, too, but not like it would have if oil had remained buyable only in dollars. The world, at this point, despises America so much, that they are likely willing to take this risk.

For the older set (10+): Saddam Hussein proclaimed in 2002 (or 2001, I forget which) that Iraq's oil could be bought in euros--breaking with a long-standing OPEC policy. And several other oil producing countries were toying with the same idea. Of course, the US government could not permit this. An Iraq invasion was planned from the start of the Bush administration; 9-11 and Saddam's move put it on the front burner.

Now, the rest of the world is talking alternative oil currencies. Not even the US can fight the whole world (and a lot of us don't WANT resource wars, anyway). Worse, OPEC is starting to listen to the demands. Both Iran and Saudi Arabia have been making deal after deal for their fossil fuels--with the EU, Russia, and China. Economies in these Middle East nations are the pits these days. What government WOULDN'T want lots of fresh, new currency coming in, to placate their restless people and keep them afloat?

The military is the US' playing card in the Middle East. Problems in Iraq notwithstanding, Saudi Arabia and Iran have two of the three largest oil supplies on the planet. Not enough troops? Well, our technology cuts out some of the needs for troops. The rest can be solved by reactivating the draft--which should happen next year. Then, the government reasons, we can just (literally) bloody well control the whole Middle East, and its oil and gas distribution. (That oil and gas are/will be depleting fast here makes this an exercise in futility--but no one's accusing the US government of having a brain between their two ears!)

Hope this helps. Any other questions, I, and even more informed posters than me on this site, will be happy to help. I, for one, am glad you are asking. More people need to...before time is up, and that time, I'm afraid, is near. Sad

Carlhole · Knight of the Realm Joined: Jul 05, 2004 Posts: 3132

William Clark, a physician actually, but someone with an interest in the politics of currencies and events surrounding oil and the middle east, has just written a book entitled "Petrodollar Warfare", available on Amazon. It would probably be a pretty good read.

I always liked the article below by F. William Engdahl:

http://www.currentconcerns.ch/archive/2003/04/20030409.php

Engdahl is German and a Princeton-trained economist. He wrote "A Century of War: Anglo-American Oil Politics and the New World Order" in which hed discusses currencies at length also.
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