oil is not big enough to impact reserve currency status, nor is oil traded in any meaningful way between the US and countries who hold large quantities of US currency.
Oil is one of if not the biggest item that every country needs, and its not the direct trade of oil between the US and other countries, but the fact that oil can only be bought with US dollars...thus, any country needing oil (i.e. every country in the world) needs a huge supply of USD to purchase it with. If oil was sold in say Euros aswell as or instead of USD then suddenly the USD is not needed in such large supply. Whether that happens or not is to be seen (rumours are OPEC is at least considering it), Russia aswell is pondering it (Iraq actually DID sell in Euros till Junior went in on his horse) Will Russia's hopes to sell oil in euros ever fly? http://www.forbes.com/home_europe/newswire/2003/11/24/rtr1159161.html When will we buy oil in euros? http://observer.guardian.co.uk/business/story/0,6903,900867,00.html European Union presses Russia to price some oil exports in euros http://www.eubusiness.com/eunews/EUNews.2003-10-30.0502 Iraq, the Dollar and the Euro http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=3193
I don't think that is correct. Oil is PRICED in dollars but can be purchased with other currencies at the exchange rate to the dollar. That's how I see it.
If you could indeed purchase oil in any currency I dont think there would be an argument about whether or not to allow sale in Euros also? All the articles I have read on the subject, including the couple I posted suggest that it will have a big impact if it ever came to pass as you DO need the USD to purchase it. "Russia has foreign currency risk right now because they sell their oil in dollars and import other items in euros," said Roger Diwan, managing director of the Washington DC-based Petroleum Finance Company."
... the US is the world's biggest consumer of oil exports, oil will be priced in US dollars. You don't try and sell your products to your biggest customer in a foreign currency now would you?
Foreign to who tho? Its only foreign to the US...im not saying it will/wont happen...but, it makes a lot of sense for someone like Russia to accept Euros instead of dollars for their oil. Aswell as OPEC. Unless the USD regains a lot of its lost strength the price of oil for America can not get cheaper, do you honestly think that OPEC and other nations will accept $28 p.b with the USD at its current rate? As mentioned elsewhere, the % increase in the cost of oil is only really made by the weak dollar and is only affecting the US, if the price comes down but the dollar stays weak than every oil producing nation in the world will be taking a huge % decrease in profit, that COULD be a catalyst for oil being sold in other currencies as I can hardly see oil rich nations taking a 30% cut in profit just for the benefit of the US. The US is a large importer, but it pales compared to the entire rest of the world, and its not like the US could simply refuse to buy the oil because the price was high, US is dependant on it.
this is simply not true. you can buy oil using *any* freely convertible, widely available currency. you guys are talking about 19th century levels of sophistication...
Im not pretending to be a guru in world economics, but, if there was no issue in what the currency oil is purchased in, why would pricing in other currencies be even mentioned or thought of as an issue to be considered? Why did Saddam accept Euros instead of USD? Why has OPEC considered it, why has Russia considered it? Even if it may be a currency is converted into its USD equivilent amount before purchase, this is still bad for oil producing nations when the USD is flagging and no nation would accept $28 pb for an extended time when the USD is 30%+ down.
that's the equivalent of asking "if we really landed a man on the moon why did they make the film Capricorn One?". there are people out there who still think the world is flat: you are going to wonder about the planet's roundness based on that? people are constantly talking about stuff they don't have Clue One about. doubly true if they work in mass media. triply true if the "talking" is happening on a chat board.