NationStates Jolt Archive

The "Iran switches to Euro" thread has brought to my attention something rather interesting which I did not know before.

to sum up:

OPEC decided in the 70's that all oil transactions would be done in US dollars.

this made the dollar very powerful, because everyone wanted them.

If Mexico wanted to sell oil to China, they had to come to the US and ask for their money to be exchanged to dollars.

this is why the US dollar was able to stay potent, even though it was only backed by the federal reserve, which is mind-blitheringly in debt.

the Euro was created, and is rapidly pulling ahead of the dollar as the most potent world currency.

In 2000, Saddam decides that Iraq would perform all oil sales in Euros instead of dollars.
( http://archives.cnn.com/2000/WORLD/meast/10/30/iraq.un.euro.reut/ )

this sets a bad precedent, because if everyone started doing so, the value of the dollar would go to the shitter, and plagues and famine ensue, with much killings of first-born.



Of course, this means that it is in the US's best interests to keep the dollar as the world standard for Oil sales.

we see what happens when the dollar is replaced: Saddam was hung.



but what would happen if oil was replaced?


I expect a three page essay by next tuesday.


(please note: the argument above is spaced in individual lines because I still intend on citing (from as reputable a source as possible) each individual line. anyone who has any information as to the whereabouts of these links, please contact me.)


Source 1:
the Center for Contemporary Conflict (a military newspaper):
http://www.ccc.nps.navy.mil/si/nov03/middleEast.asp

I'm not planning to post anything at this hour that requires work. You're supposed to be informing and entertaining me.

I'm not planning to post anything at this hour that requires work. You're supposed to be informing and entertaining me.

*does a little dance*

I don't actually expect an essay, I was just asking rhetorically, as I thought it might spark an interesting debate.

If OPEC decided to cut supplies then we would most probably see a repeat of the 1970's recession. If they decided only to cut U.S. supplies then it is naive to think that this would only be detrimental to the U.S. economy. It would affect tourism, the chinese export market and basically the world economy would take a turn for the worst. I don't want to predict the depression but a collapse wouldnt be off the cards.
However in this day and age it is unlikely to see OPEC doing such things. The U.S. military presence in many OPEC countries would be on their minds and also the fact it would hurt them too because they would be losing out on all the oil revenues. While in 1970 there was a backlash due to the israel conflict that incentive is no longer there with most Arab countries looking to iran as the major threat.
Also the U.S. would have oil supplies from Alaska and Iraq which might dampen the impact of an embargo.
I might note that it would be unimaginably beneficial for the U.S. to wean itself off arab oil. Politically, environmentally and economically

it isn't about OPEC cutting supplies, it's about the demand for Oil disappearing if/when an alternative is found.

the point of this is that for as long as OPEC stands by its 1973 decision to sell oil in dollars and dollars only, the US dollar stays strong on the world market.

strong enough to work despite massive debt.


in 2000, Iraq switched from dollars to euros. ( http://archives.cnn.com/2000/WORLD/meast/10/30/iraq.un.euro.reut/ )

If the rest of OPEC follow suit, the value of the dollar on the world market dies, and all of the massive debts are called in, pretty much crashing the US economy.


so that's what happens if Oil is sold in euros instead of dollars.

do we have any reason to believe that anything different would happen if oil disappeared altogether?

and if we go to such great lengths to protect the strength of the dollar in the oil market, what is to say that it is not the same as far as alternatives?

for surely, if the oil market were to dwindle in the face of an environmental alternative, the dollar would dwindle with it, whether or not OPEC still supports it.

therefore I say to you: the development of a viable alternative to oil is being impeded deliberately so that the oil market stays strong, and so that the dollar stays strong with it.

who disagrees?

What you write is new to me, so I cannot really discuss the issue. What strikes me as particularly odd, though, is the part about Iraq performing oil sales in euros in 2000. The euro currency was introduced 01/01/2002.

What you write is new to me, so I cannot really discuss the issue. What strikes me as particularly odd, though, is the part about Iraq performing oil sales in euros in 2000. The euro currency was introduced 01/01/2002.

http://news.bbc.co.uk/hi/english/static/in_depth/business/2001/euro_cash/history/default.stm

The euro was launched on 1 January 1999 as an electronic currency and became legal tender on 1 January 2002

it isn't about OPEC cutting supplies, it's about the demand for Oil disappearing if/when an alternative is found.

the point of this is that for as long as OPEC stands by its 1973 decision to sell oil in dollars and dollars only, the US dollar stays strong on the world market.

strong enough to work despite massive debt.


in 2000, Iraq switched from dollars to euros. ( http://archives.cnn.com/2000/WORLD/meast/10/30/iraq.un.euro.reut/ )

If the rest of OPEC follow suit, the value of the dollar on the world market dies, and all of the massive debts are called in, pretty much crashing the US economy.


so that's what happens if Oil is sold in euros instead of dollars.

do we have any reason to believe that anything different would happen if oil disappeared altogether?

and if we go to such great lengths to protect the strength of the dollar in the oil market, what is to say that it is not the same as far as alternatives?

for surely, if the oil market were to dwindle in the face of an environmental alternative, the dollar would dwindle with it, whether or not OPEC still supports it.

therefore I say to you: the development of a viable alternative to oil is being impeded deliberately so that the oil market stays strong, and so that the dollar stays strong with it.

who disagrees?

The dollar is a strong currency. You attribute its strenght solely to its use in the oil market. However this in turn implies that the other factors affecting its strength are negligible and this is simply not true. Rising inflation, decreased confidence and a shift of the worlds economy to the East are all other factors that could have an affect on the strength of the dollar and while these are connected to the oil trade, by no means does the oil trade dictate the strength of the dollar.

To suggest that a change to euros would destroy the dollar implies that the euro is nothing and with that the pound is also worthless because they are not used in the oil market. because what your assertions imply is wrong therefore your assertions are wrong