I guess this idea is dead.
OPEC may switch to euro, will "take time" -sec-gen
Message 24296582
Oil Min: Iran Has Halted Oil Transactions In Dollars -AFP
Message 24121001
Iran has reduced its assets in dollars held in foreign banks and urged OPEC to take collective action to price oil in other currencies such as the euro, instead of the U.S. currency which is used across the world at present.
Delinkage Oil Price From Dollar Under Assessment
Message 24066888
Ministers have been discussing openly, as sources present during the meeting stated, whether oil should continue to be valued in dollars. Iran and Venezuela have already been openly urging members to consider the option. However, as OPEC officials stated after the meeting, even the mentioning of a possibility would currently have a debilitating effect on the position of the dollar. Still, Iran and Venezuela seem to be heading towards an implementation of the idea. Already, most Asian traders are being asked by Iran to have contracts set up in either Euros or Yen.
The Dollar Collapse's Oil Ramifications
Message 23734155
But what happens when, as is inevitable, the dollar starts to fall in an even more substantial way? The obvious solution for the Middle Eastern petrostates is to stop pricing the oil they sell in dollars and start pricing it in euros.
Pricing oil in dollars might have made sense when there was a paucity of other relatively stable currencies, when U.S. demand was more significant as a proportion of world demand than it is today, and when the Middle East imported more from the U.S. - but not any more.
However, the extra demand for the dollar created by its use as the currency of global oil trading is a significant prop for the currency. Take that away, and another round of depreciation is likely.
One would expect that the U.S. government to exert considerable diplomatic pressure to maintain the dollar’s position, but with a changed diplomatic environment and the emergence of very real geopolitical rivals to the U.S., such as China, success can certainly not be guaranteed.
It is also worth noting that China is on trend to be largest consumer of oil before long. So maybe one day, oil will be priced in renminbi. But for now, the euro looks like the way to go – to the detriment of the dollar. |
