There was a time when the sterling pound used to be the currency of choice for international trade. That stopped when the UK declined as a worlwide economic power. The world (including oil producers) didn't stop using pounds and started using dollars because the US started threatening everyone around. So if the world start preferring euros to dollars that will be not because some two bit dictator starts selling his oil in euros, but because the european economy proves to be more stable and resilient than the US economy (unlikely with all the socialism going on over there). Your theory is that people adopt one currency rather than another because of convention. But you're wrong the main reason is self interest (nothing new here), for example would you accept argentine pesos rather than dollars? No because you know it's a worthless currency and you don't know maybe tomorrow loses 50% of it's value overnight. So .. is currency choice convention or self interest?
Doesn't the US, being the largest consumer of oil, have a lot of leverage in this? I mean, can't we force them to accept dollars? If your biggest customer wants to pay with a credit card, are you going to force them to use a check?
I read a very good rebuttal re this rumour (oil in $ vs. Euro) but can't find the link now. If I do I'll post it. When you really think about it, it makes no sense. Probably an April 1 prank.
Started a thread for comments on this article: http://www.globalpolicy.org/nations/sovereign/dollar/2003/03oil.htm No one replied to it however, maybe because it's a lengthy article.... An excerpt: OIL DOLLARS The key to it all is the fiat currency for trading oil. Under an OPEC agreement, all oil has been traded in US dollars since 1971 (after the dropping of the gold standard) which makes the US dollar the de facto major international trading currency. If other nations have to hoard dollars to buy oil, then they want to use that hoard for other trading too. This fact gives America a huge trading advantage and helps make it the dominant economy in the world. As an economic bloc, the European Union is the only challenger to the USA's economic position, and it created the euro to challenge the dollar in international markets. However, the EU is not yet united behind the euro -- there is a lot of jingoistic national politics involved, not least in Britain -- and in any case, so long as nations throughout the world must hoard dollars to buy oil, the euro can make only very limited inroads into the dollar's dominance. In 1999, Iraq, with the world's second largest oil reserves, switched to trading its oil in euros. American analysts fell about laughing; Iraq had just made a mistake that was going to beggar the nation. But two years on, alarm bells were sounding; the euro was rising against the dollar, Iraq had given itself a huge economic free kick by switching. Iran started thinking about switching too; Venezuela, the 4th largest oil producer, began looking at it and has been cutting out the dollar by bartering oil with several nations including America's bete noir, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market. The greenback's grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the US's economy and its dominance of world trade. HOW DOES THE US GET ITS DOLLAR ADVANTAGE? Imagine this: you are deep in debt but every day you write cheques for millions of dollars you don't have -- another luxury car, a holiday home at the beach, the world trip of a lifetime. Your cheques should be worthless but they keep buying stuff because those cheques you write never reach the bank! You have an agreement with the owners of one thing everyone wants, call it petrol/gas, that they will accept only your cheques as payment. This means everyone must hoard your cheques so they can buy petrol/gas. Since they have to keep a stock of your cheques, they use them to buy other stuff too. You write a cheque to buy a TV, the TV shop owner swaps your cheque for petrol/gas, that seller buys some vegetables at the fruit shop, the fruiterer passes it on to buy bread, the baker buys some flour with it, and on it goes, round and round -- but never back to the bank. You have a debt on your books, but so long as your cheque never reaches the bank, you don't have to pay. In effect, you have received your TV free. This is the position the USA has enjoyed for 30 years -- it has been getting a free world trade ride for all that time. It has been receiving a huge subsidy from everyone else in the world. As it debt has been growing, it has printed more money (written more cheques) to keep trading. No wonder it is an economic powerhouse! Then one day, one petrol seller says he is going to accept another person's cheques, a couple of others think that might be a good idea. If this spreads, people are going to stop hoarding your cheques and they will come flying home to the bank. Since you don't have enough in the bank to cover all the cheques, very nasty stuff is going to hit the fan! But you are big, tough and very aggressive. You don't scare the other guy who can write cheques, he's pretty big too, but given a 'legitimate' excuse, you can beat the tripes out of the lone gas seller and scare him and his mates into submission. And that, in a nutshell, is what the USA is doing right now with Iraq.
The author of the article is Geoffrey Heard - Melbourne, Australia, writer on the environment, sustainability and human rights (credentials listed at the bottom of the article). Does he know what he is talking about when he is talking about economics? Any more credible sources to confirm the theory, like maybe someone with financial background as opposed to anti-american one.
This article clearly a piece of pro-Iraq propaganda First, no one has to hoard dollars to buy oil because there is an amazing thousands of year-old invention called "currency exchange"... if someone insists in receiving euros, american business just ask their bank to change dollars to euros... if someone asks for dollars, and you don't have them, then just change whatever pos currency you keep your money into dollars. It's an entirely different thing to say that countries PREFER to hoard their money in dollars, because their own currencies aren't worth the paper is printed on. And second, the euro has been rising because european investors took their money out of the US bear market. Not because Saddam started to ask euros, that's ridiculous. Marxists always look for some economic reason for US foreign policy that's not new. According to Marxism, economics is the only reason for everything: politics, foreign policy, class struggle. Human nature is much more complicated than that. Try to explain with economics Al-Qaeda's hate of Americans. Also, only communists believe the US is an economic power because we impose the dollar on other countries. The US is an economic power because it's a wealth-creating machine. Period. As long as socialism prevails in Europe and most of the rest of the world, the US has nothing to fear about its economic superiority.
In your dreams... you will die and US Capitalism will be alive and well... like Marx, he prognosticated the end of capitalism more than 100 years ago, now he's dead and everybody's still laughing at him.