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Petrodollar warfare

Petrodollar warfare

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    The phrase petrodollar warfare refers to a hypothesis that a hidden, driving force of United States foreign policy over recent decades has been the status of the United States dollar as the world's dominant reserve currency and as the currency in which oil is priced. The term was coined by William R. Clark, who has written a book with the same title. The phrase oil currency wars is sometimes used with the same meaning.

    Supporters of this hypothesis believe that the value of the U.S. dollar is determined by the fact that many key commodities (particularly oil and natural gas) are denominated in dollars. They believe that if the denomination changes to another currency, such as the euro, many countries would sell dollars and cause the banks to shift their reserves because they would no longer need dollars to buy oil and gas. This would weaken the dollar relative to the euro (see supply and demand). The core of the hypothesis is that U.S. administrations are greatly motivated by fear of the consequences of a weaker dollar, particularly higher oil prices. This motivation is seen as underlying and explaining many aspects of U.S. foreign policy, including the ongoing Iraq War.



    [edit] Background

    Most oil sales throughout the world are denominated in United States dollars (USD).[1] Because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This causes demand for USDs to remain high, regardless of economic conditions in the United States. This allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries.

    It also means that the price of oil is more stable in the U.S. than anywhere else, since importers do not need to worry about exchange rate fluctuations. Since the U.S. imports a great deal of oil, its markets are heavily reliant on oil and its derivative products (jet fuel, diesel fuel, gasoline, etc.) for their energy needs. The price of oil can be an important political factor; American administrations are quite sensitive to the price of oil.

    Political enemies of the United States therefore have some interest in seeing oil denominated in euros or other currencies. The EU could also theoretically accrue the same benefits if the euro replaced the dollar. However, the European economy could also be seriously damaged if the euro were to appreciate significantly against the dollar or other world currencies.

    In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros.[2] When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the USD.[3]

    After considerable delay, Iran has now opened an oil bourse which does not accept U.S. Dollars. Proponents of this theory fear that it will give added reason for the U.S. to topple the Iranian regime as a means to close the bourse and revert Iran's oil transaction currency to USDs.

    In mid-2006 Venezuela indicated support of Iran's decision to offer global oil trade in the euro currency. (See: “Venezuela Backs Plan to Sell Oil in Euros” Associated Press, June 1, 2006)[4]

    As a result they have limited ability to influence the denomination of sales one way or the other. A large number of traders would have to agree to a change in denomination before a change occurred.

    Of particular concern is America's dependence on foreign oil. Many economists feel that the recent rise in oil prices is at least partially tied to the fall of the US dollar relative to most currencies. Since oil is priced in dollars, sellers have increased prices to compensate for their "real" loss of income. Economists generally agree that higher oil prices pose a risk of inflation, recession, or both. Inflation would almost certainly rise if the dollar were to depreciate heavily.

    At least one U.S. Representative, Republican Ron Paul of Texas, has made very strong statements advancing similar views, using the phrase “dollar hegemony” to describe U.S. policy and proposing related reforms.[5]

    [edit] Project Censored Awards in 2004 and 2006

    The topic of oil currency warfare under the title U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq won a 2003 Project Censored award in 2004.

    "Iran’s New Oil Trade System Challenges U.S. Currency" won a 2006 Project Censored award in Top 25 Censored Stories for 2006 | Project Censored at www.projectcensored.org.

    These two essays were written by the author of the book Petrodollar Warfare, William Clark.

    [edit] See also

    [edit] Further reading

    • Clark, William R.: Petrodollar Warfare : Oil, Iraq and the Future of the Dollar, New Society Publishers, 2005, ISBN 0-86571-514-9
    • Peter, Phillips (2003). The Top 25 Censored Stories: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq. New York: Seven Stories Press. 
    • Engdahl, F. William, A New American Century? Iraq and the hidden euro-dollar wars, Current Concerns, No 4, June 2003
    • Engdahl, F. William: A Century of War: Anglo-American oil politics and the New World Order, Pluto Press, 2004, ISBN 0-7453-2309 X

    [edit] References

    [edit] Books

    [edit] External links

    [edit] Background

    [edit] Pro views

    [edit] Critical views







    Wednesday, 4 June 2008

    Mahalnye minyak! Apa mau bikin?

    I honestly do not understand the oil business. I still cannot comprehend how the crude oil price per barrel is set, and fluctuating every freaking hour. I cannot grasp the concept of how increasing the oil price in Malaysia should help accommodate this price hike, when Malaysia itself is an oil-producing country.

    oil_barrelDeep down in my immature thoughts, I believe that sometime, somewhere, some group of people are playing fool of us. While we are whining at how bad our lives will soon turn out, they are laughing maniacally, admiring their own smart-ass-ness at screwing others. While we have to fork out more money to cover out daily expenses, those people are cashing in more $$$.

    As I post this, Malaysian petrol price has gone up 40% - from RM1.92 to RM2.70 per litre. Truly devastating. But some say it is still the lowest price in the whole South East Asia region. Oh did I mention we're an oil-producing country?

    On the other hand, putting all the ranting aside, I believe (hope) that the government's move to reduce oil subsidy has some reasonable explanation. I don't know what it is, as I really suck at economy and finance. I'm simply reassuring myself that those great thinkers and high-minded people of Malaysia know what they are doing, and not for the filling of their own wallets.

    So, if anyone has any great 'Complete Idiot's Guide to...' article or explanation to what's going on, please point me to them.

    (Kesian Azie ye... baru beli kerete MyVi...)


    Petrodollar warfare: Can switching to PetroEuro help fix this?


    Meanwhile, at the other pole of my immature thoughts, I think we are partly to be blamed ourselves. This, however, may be quite different from all the common and mainstream tirades you have heard. So brace yourself while I'm putting the blame on YOU.

    Being the Malaysians that we are, it becomes habitual we you need a car to go out. When a convenience store is just 200m away from home, what is wrong with going over ON FOOT? Panas? Alaa takpela dekat je. Bawak kereta/motor lagi menyumbang kepada kepanasan global.

    Every time we shop at a supermarket, we insist on obtaining a sheet of plastic bag to go with anything we buy, even for a tiny piece of pencil sharpener. What were you going to do with so many plastic bags anyway? Buat bungkus cempedak? For all I know, manufacturing of plastic bags require petroleum.

    plastic bagsCurrently there are literally hundreds of Sainsbury's plastic bag at my home right now, where the prospect is to throw them away as we're moving out. They are not recyclable, not biodegradable, extremely high longevity which will remain in the landfill for staggering thousands of years. What should have been done was to reuse them every time we go shopping. Or not taking a new plastic bag at all for a packet of Walker's Sensation potato chips. It's far too late now hahahahhaa...

    Despite vigorous campaign by the Malaysian government (and UK), and a lot of money wasted on educating citizen to RECYCLE, we still DON'T KNOW HOW TO. As in don't know HOW to recycle, what can be recycled, where are the recycle bins etc. It is always far more convenient to toss that Tongkat Ali Power Root can into the nearby garbage bin. Recycle bin tu jauh kan. dkat hujung jalan tu. nak kene kumpul banyak2 baru berbaloi. pastu nak kene naik kereta lagi. eh silap, jalan kaki.


    The symbol that lost its meaning

    Ultimately, my point is: In a situation where we never put any effort in caring our mother earth, lagi mau komplen harga minyak mahal!!!

    But if you feel that you've done enough, and are severely affected by the price rise, feel free to rant about it, and allow me to join you.

    Page mailing to a friend temporary disabled