Did you know that oil is traded in U.S. dollars and no other currency? I didn’t until a few months ago. I was reminded of it from this article at lindasog.com.
I found that oil was only traded in U.S. dollars kinda odd. Why is it only traded in dollars, not euros or shekels or rupees? My brain couldn’t comprehend, so I let it slide. It became more trivia in my addled brain.
Come to find out Iran is planning to trade oil for euros now. Okay, so what’s the big deal?
Well, it seems the dollar is propped up by oil. I don’t think this is some conspiracy thing, but please correct me if I’m wrong. We went off the gold standard in 1972, but oil backed the dollar, basically keeping our monetary system stable and prosperous. After all, if you can only buy oil in dollars, then you have to have dollars to buy oil. Every country on earth would need U.S. dollars to buy their oil. In 1972 they may’ve been thinking, “It’s highly unlikely people won’t need oil anytime soon, so there’s plenty of time to figure out another way to back the dollar and keep it strong.”
Well, no one was going to fuck with the U.S. in any major way back in the 70s. Viet Nam, the Cold War, re-election of Tricky Dick… shiiiit, we looked like we were militarily ready and willing to fuck with anyone.
But now, we’re kinda looking like the big dude who cries when we get into a real fight. Yes, we look like pussies.
What better time to undermine the big pussies, right? The E.U. can get Iran to trade oil in euros in exchange for allowing Iran to do some heinous shit, but then THEIR currency is backed by oil, making it much stronger and propped up by the most-used energy source in the world. Iran gets a pass at the U.N. if the U.S. starts to get crabby, and the E.U. becomes more secure with oil backing its fiat currency. Win-win, right?
We all know the capricious nature of international politics, and I’m betting the E.U. is selling its soul for this deal, but now maybe you can see why the E.U. fucks with us at the U.N.
The full implications range much farther than this, but this was a question I’d asked myself before, and now I think this is the answer. Either that or I’m on crack. You decide.
This is all just a guess, mind you, but it seems to fit. I’m no economist.
Update 20061212: More on how Oil Producing Countries own dollars, and how they’re getting rid of them.