November 05, 2007

The Last Days of the PetroDollar

"You have meddled with the primal forces of nature, Mr. Beale, and I won't have it. Is that clear? You think you've merely stopped a business deal? That is not the case. The Arabs have taken billions of dollars out of this country, and now they must put it back. It is ebb and flow, tidal gravity. It is ecological balance. You are an old man who thinks in terms of nations and peoples. There are no nations; there are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems; one vast, interwoven, interacting, multivaried, multinational dominion of dollars." -- character Arthur Jensen from the movie Network


The news came out yesterday when few would notice.

CARACAS (Reuters) - OPEC is likely to discuss creating a basket of currencies for oil pricing at its next summit due to the steady decline in the dollar, Venezuela's Energy Minister Rafael Ramirez said on Friday.

"The need to establish a basket of currencies ... will probably be a point of discussion in the next OPEC summit," Ramirez told reporters during an evening event in the presidential palace.

"The dollar as a benchmark currency has been weakening quite a lot and it creates distortions in oil markets."



While disturbing, it wouldn't mean much except for the fact that this is merely the latest step in a trend away from the dollar by OPEC nations. For example:


UAE central bank diversifies away from dollars

Kuwait unhooks the currency peg to the dollar

Syria (not an OPEC nation) unhooks currency peg to the dollar

Saudi Arabia refuses to cut interest rates with Federal Reserve

Iran sells oil in Euros

Venezuela currency peg is in danger, and plans to sell oil priced in Euros


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