Petrodollar Warfare Oil Iraq And The Future Of The Dollar
The term “petrodollar” refers to the practice of pricing oil in US dollars and using those dollars to trade oil internationally. This system has been in place since the 1970s, when the US and Saudi Arabia made a deal to price oil exclusively in dollars. Since then, the petrodollar has played a significant role in global finance and politics. However, recent events suggest that the petrodollar system may be under threat, particularly due to conflicts over oil in Iraq.
The History of the Petrodollar
The petrodollar system came about in the 1970s, following the collapse of the gold standard. At the time, the US was facing high inflation and a devalued currency. In order to maintain the dominance of the dollar, the US made a deal with Saudi Arabia to price oil exclusively in dollars. Other OPEC countries soon followed suit, and the petrodollar system was born. This system has been beneficial for the US, as it has allowed the country to print dollars without worrying about the value of the currency. It has also given the US significant political power, as countries that need oil must also hold dollars.
The Iraq War and the Petrodollar
The Iraq War had significant implications for the petrodollar system. Prior to the war, Iraq had been trading oil in euros, which threatened the dominance of the dollar. The US invasion of Iraq in 2003 was partly motivated by a desire to maintain the petrodollar system. Following the invasion, Iraq switched back to trading oil in dollars. However, the war had other consequences that may have contributed to the decline of the petrodollar. The war was expensive and led to a significant increase in US debt. Additionally, it damaged the US’s reputation in the world, which may have made countries less willing to hold dollars.
The Future of the Petrodollar
Recent events suggest that the petrodollar system may be under threat. The rise of China as an economic superpower has led to increased demand for oil in China, and many oil-producing countries are now trading oil with China in yuan rather than dollars. Additionally, the US’s increasing debt and political instability may be making countries less willing to hold dollars. The recent conflict over oil in Iraq, with the US and Iran both vying for control, has also raised questions about the stability of the petrodollar system.
Conclusion
The petrodollar system has been in place for decades, but recent events suggest that it may be under threat. The rise of China, the US’s increasing debt, and conflicts over oil in Iraq all suggest that the petrodollar system may be less stable than it once was. However, it remains to be seen whether the petrodollar system will continue to dominate global finance and politics, or whether it will be replaced by a new system based on a different currency.