Art - With regard to oil price in euros vs dollars, I just thought on how control of the Iraqi oil can cause imbalances. This is also partly a response to your post in the STW thread that discusses dollar/euro oil pricing. See if the following makes sense and can be implemented.
One possibility is to impose "security" surcharge on all crude oil originating from ports in the Persian Gulf. It would be the cost for "maintaining security" of the Gulf area shipping lanes and for ensuring stability and reliability of the oil delivery. It is equivalent to "protection money" with much greater significance.
It would be control of the pricing as well as the payment currency. This can be done because US will have control of Iraq's production quota, which can be leveraged to control and dictate neighboring Persian Gulf output and pricing. The combined oil output from this region is 70 to 75% of total world production (I think that's about right).
The "security" surcharge can have significant impact on world's regional economies' growths, the European Union and China in particular, and their impact on US economic dominance. The US dollar needs to remain the dominant world currency because its strength and confidence in US currency are needed (absolute musts) to support the US trade deficit and government budget deficit. Without it, US currency can collapse from lost of confidence and the books don't balance. (The alternative would be hyperinflation and let the debts become less value, but exacerbate other discrepancies and would greatly accelerate the lack of confidence.)
Control of energy market may possibly has the same impact as stunting or slowing the growth potential of EU economy. The euros is the only challenge to the U$D, a minor one at the present, but has the potential to be near equal in 20 years. The U$D-Euro pricing discrepancy can alsp keep China's currency to remain pegged to U$D, rather than going 50/50 U$ and Euros.
A variable "security" surcharge rate on Persian Gulf oil can be imposed in a manner that can counteract changes in currency exchange rates. An exagerated example is a 5% sucharge if oil is paid in USD or 10% if paid in Euros. This will ensure payment in U$D, maintain strength of the U$D, the petrodollar, and currency reserve of U$dollar to subsidize the US budget deficits. |
