www.bloomberg.com Open in urlscan Pro
151.101.65.73  Public Scan

Form analysis
0 forms found in the DOM

Text Content

Skip to content
Bloomberg the Company & Its ProductsThe Company & its ProductsBloomberg Terminal
Demo RequestBloomberg Anywhere Remote LoginBloomberg Anywhere LoginBloomberg
Customer SupportCustomer Support


 * BLOOMBERG
   
   Connecting decision makers to a dynamic network of information, people and
   ideas, Bloomberg quickly and accurately delivers business and financial
   information, news and insight around the world
   
   
   FOR CUSTOMERS
   
    * Bloomberg Anywhere Remote Login
    * Software Updates
    * Manage Products and Account Information
   
   
   SUPPORT
   
   Americas+1 212 318 2000
   
   EMEA+44 20 7330 7500
   
   Asia Pacific+65 6212 1000


 * COMPANY
   
    * About
    * Careers
    * Diversity and Inclusion
    * Tech At Bloomberg
    * Philanthropy
    * Sustainability
    * Bloomberg London
    * Bloomberg Beta
    * Gender-Equality Index
   
   
   COMMUNICATIONS
   
    * Press Announcements
    * Press Contacts
   
   
   FOLLOW
   
    * Facebook
    * Instagram
    * LinkedIn
    * Twitter
    * YouTube


 * PRODUCTS
   
    * Bloomberg Terminal
    * Data
    * Trading
    * Risk
    * Compliance
    * Indices
   
   
   INDUSTRY PRODUCTS
   
    * Bloomberg Law
    * Bloomberg Tax
    * Bloomberg Government
    * BloombergNEF


 * MEDIA
   
    * Bloomberg Markets
    * Bloomberg Technology
    * Bloomberg Pursuits
    * Bloomberg Politics
    * Bloomberg Opinion
    * Bloomberg Businessweek
    * Bloomberg Live Conferences
    * Bloomberg Radio
    * Bloomberg Television
    * News Bureaus
   
   
   MEDIA SERVICES
   
    * Bloomberg Media Distribution
    * Advertising


 * COMPANY
   
    * About
    * Careers
    * Diversity and Inclusion
    * Tech At Bloomberg
    * Philanthropy
    * Sustainability
    * Bloomberg London
    * Bloomberg Beta
    * Gender-Equality Index
   
   
   COMMUNICATIONS
   
    * Press Announcements
    * Press Contacts
   
   
   FOLLOW
   
    * Facebook
    * Instagram
    * LinkedIn
    * Twitter
    * YouTube


 * PRODUCTS
   
    * Bloomberg Terminal
    * Data
    * Trading
    * Risk
    * Compliance
    * Indices
   
   
   INDUSTRY PRODUCTS
   
    * Bloomberg Law
    * Bloomberg Tax
    * Bloomberg Government
    * Bloomberg Environment
    * BloombergNEF


 * MEDIA
   
    * Bloomberg Markets
    * Bloomberg
      Technology
    * Bloomberg Pursuits
    * Bloomberg Politics
    * Bloomberg Opinion
    * Bloomberg
      Businessweek
    * Bloomberg Live Conferences
    * Bloomberg Radio
    * Bloomberg Television
    * News Bureaus
   
   
   MEDIA SERVICES
   
    * Bloomberg Media Distribution
    * Advertising


 * BLOOMBERG
   
   Connecting decision makers to a dynamic network of information, people and
   ideas, Bloomberg quickly and accurately delivers business and financial
   information, news and insight around the world
   
   
   FOR CUSTOMERS
   
    * Bloomberg Anywhere Remote Login
    * Software Updates
    * Manage Contracts and Orders
   
   
   SUPPORT
   
   Americas+1 212 318 2000
   
   EMEA+44 20 7330 7500
   
   Asia Pacific+65 6212 1000


Sign InSubscribeSearch

Live TVMarkets
Chevron Down
EconomicsIndustriesTechPoliticsBusinessweekOpinionMore
Chevron Down
Europe Edition
Chevron Down
Menu

Subscribe
Opinion
Javier Blas, Columnist


THE PETRODOLLAR IS DEAD, LONG LIVE THE PETRODOLLAR

Talk of pricing oil in anything but greenbacks is greatly exaggerated. Again. 

June 27, 2024 at 6:00 AM GMT+2
By Javier Blas
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. He
is coauthor of “The World for Sale: Money, Power and the Traders Who Barter the
Earth’s Resources.”
FacebookTwitterLinkedInEmailLink
Gift
Expand


Rumors of the death of the petrodollar are greatly exaggerated.

Photographer: Anton Petrus/Moment RF/Getty Images

FacebookTwitterLinkedInEmailLink
GiftGift this article
Before it’s here, it’s on the Bloomberg Terminal
Bloomberg Terminal LEARN MORE
FacebookTwitterLinkedInEmailLink
Gift
BookmarkSave


The petrodollar died this month -- or so I learnt via the financial blogosphere.
In the past fortnight, Google searches for “petrodollar” have spiked to a
record, and viral posts about Saudi Arabia ditching the greenback have
ricocheted throughout commodity and currency trading rooms. Apparently, a
cataclysmic event has ended American economic hegemony.

Epochal stuff — and completely false. Nonsense on stilts.

For a few days, I resisted the temptation to rebut the chatter. It was pushed by
a combination of crypto speculators, gold bugs, conspiracy theorists and, above
all, lots of Russian bots on social media. Against them, you can’t win an
argument. To whoever asked me, I pointed to a 2023 column where I wrote that the
collapse of the petrodollar — and the rise of the petroyuan — was a myth. Oil, I
argued, would remain priced in greenbacks.

I had hoped that reality would quickly impose itself: After all, Saudi Arabia is
still selling its oil in US dollars more than two weeks after the petrodollar
supposedly died1. But I was wrong; instead of dying away, the baloney now has
traction even inside Wall Street trading rooms and among financial commentators
who should know better.

So, here’s what’s happening — and not happening.

First, how it all restarted. A few weeks ago, a number of posts on social media
flagged the imminent 50th anniversary of a meeting between American and Saudi
officials in Washington on June 8, 1974, that lead to the creation of the
so-called US-Saudi Joint Commission on Economic Cooperation. That was, the viral
story claimed, the origin of the petrodollar; the day when Washington and Riyadh
cut a secret deal to link the black gold and the greenback forever.

But it wasn’t. In reality, Saudi Arabia sold its oil in other currencies,
including sterling, until late 1974, when it decided, probably encouraged by the
US, to exclusively use the dollar. Even back then, at times the Saudis accepted
non-dollar payments for their petroleum, including British fighter planes via
the controversial Al Al-Yamamah oil-for-weapons barter deal in the 1980s and
1990s. As London was the seller, the price of the planes was set in sterling.

What the Saudis and the Americans did agree on 50 years ago was to channel the
kingdom’s newfound wealth, after oil prices jumped following the first energy
crisis, into the US Treasury market.

In its original incarnation, the petrodollar was about recycling oil money, and
far less about what currency crude was priced and invoiced in. The Saudis poured
money into American sovereign debt, helping Washington to finance its deficits,
and in return the US offered secrecy about the financial dealings and military
protection.

Half a century ago, the Saudis had lots of money and little domestic capacity to
absorb it. In 1974, the country’s current account surplus was worth more than
50% of its gross domestic product. The petrodollar reflected that massive
surplus. The US didn’t benefit because Saudi Arabia priced its oil in dollars,
but because it recycled those funds into the American debt market. The natural
outcome of those flows was a stronger American currency.

In that sense, the petrodollar died long ago — and few noticed. Probably, it
stopped having a significant influence on global financial markets about three
decades ago, if not even earlier. Even during the price spike between 2003 and
2008, the value of dollars recycled into American debt instruments was very
limited, as OPEC nations had the capacity — and need — to use their wealth at
home, spending the money on imports of goods and services.

Fast forward to today, and Saudi Arabia doesn’t have a surplus to recycle at
all. Instead, the country is borrowing heavily in the sovereign debt market2 and
selling assets, including chunks of its national oil company, to finance its
grand economic plans. True, Riyadh still holds significant hard currency
reserves, some of them invested in US Treasuries. But it’s not accumulating them
anymore. China and Japan have significant more money tied up on the American
debt market than the Saudis do.

Before it’s here, it’s on the Bloomberg Terminal
Bloomberg Terminal LEARN MORE





HomeBTV+Market DataOpinionAudioOriginalsMagazineEvents
News
MarketsEconomicsTechnologyPoliticsGreenCryptoAI
Work & Life
WealthPursuitsBusinessweekCityLabEqualityPursuitsWork Shift
Market Data
StocksCommoditiesRates & BondsCurrenciesFuturesSectorsEconomic Calendar
Explore
NewslettersExplainersThe Big TakeGraphicsSubmit a TipAbout Us
Terms of ServiceManage CookiesTrademarksPrivacy Policy
CareersMade in NYCAdvertise
Ad Choices
Help©2024 Bloomberg L.P. All Rights Reserved.




CONTINUE READING WITH ONE OF THE OPTIONS BELOW


FREE ACCOUNT

 * CheckmarkRead this article
 * CheckmarkFree newsletters


SUBSCRIPTION

 * CheckmarkUnlimited access to Bloomberg.com
 * CheckmarkUnlimited access to the Bloomberg app
 * CheckmarkSubscriber-only newsletters

Register for free
Continue
Sign InTerms of ServicePrivacy PolicyManage Cookies