The Collapse of the Petro Dollar

The Collapse of the Petro Dollar

by.

Hendrikus Franz Josef, M.Si,

(International Relations Observer, CEO The Hendrikus Center,

https://www.youtube.com/@thehendrikuscenter2794)

The Petro Dollar is a term used to describe the agreement between the United States and Saudi Arabia in 1973, which established that oil sales would be denominated in US dollars. This agreement had significant implications for the global economy, as it created a demand for US dollars, making it the world's dominant currency. However, the collapse of the Petro Dollar is a looming possibility, and it could have far-reaching consequences for the global economy.

The first factor that could lead to the collapse of the Petro Dollar is the increasing global reliance on renewable energy. As more countries shift towards renewable energy sources, the demand for oil is likely to decrease. This decline in demand will lead to a decrease in the value of the US dollar, as the Petro Dollar agreement will no longer be as crucial as it once was.

The second factor that could lead to the collapse of the Petro Dollar is the increasing use of alternative currencies, such as the euro, the yuan, and the yen. Many countries are seeking to reduce their dependence on the US dollar, as it leaves them vulnerable to US economic policies. China, in particular, has been aggressively promoting the use of the yuan in global trade, offering discounts to countries that use it to purchase Chinese goods. If more countries begin to use alternative currencies, the demand for the US dollar will decrease, leading to a decline in its value.

The third factor that could lead to the collapse of the Petro Dollar is the increasing US debt. The US has been running a trade deficit for several years, meaning it is importing more than it is exporting. As a result, it has to borrow money from other countries to finance its deficit. This has led to an increase in US debt, which currently stands at over $28 trillion. If the US is unable to repay its debt, it will lead to a decrease in the value of the US dollar, as investors will lose faith in the US economy.

The collapse of the Petro Dollar would have significant implications for the global economy. The US dollar is currently the world's reserve currency, meaning it is used as a store of value by central banks and governments around the world. If the Petro Dollar collapses, it would lead to a significant decrease in the value of the US dollar, making it less attractive as a reserve currency. This could lead to a shift towards alternative currencies, such as the euro, the yuan, and the yen.

Furthermore, a decrease in the value of the US dollar would lead to an increase in the price of oil, as oil-producing countries would demand more dollars to compensate for the decrease in the value of the currency. This, in turn, would lead to an increase in the cost of goods and services around the world, as oil is used in the production and transportation of many products.

In conclusion, the collapse of the Petro Dollar is a looming possibility, and it could have far-reaching consequences for the global economy. Factors such as the increasing global reliance on renewable energy, the increasing use of alternative currencies, and the increasing US debt could all contribute to the collapse of the Petro Dollar. If this were to happen, it would lead to a significant decrease in the value of the US dollar, making it less attractive as a reserve currency, and leading to an increase in the price of oil and the cost of goods and services around the world.