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The Battle for the Dollar

Times Online (UK) has a reasonable article titled Dollar faces new sell-off if Gulf states end greenback pegs that discusses the concern of some Middle East oil-producing States in divesting themselves of the so-called dollar peg. Currently, the petrodollar is the primary currency used to purchase oil. This petrodollar is already on its way out as Iran and Venezuela are looking to more currencies to be used to purchase oil. This can have a big negative consequence on the value of the dollar as more foreign States start using other currencies to hoard and redeem for oil. The concern here in the States is that the dollar’s loss as the petro reserve currency would cause oil prices to skyrocket, meaning a weaker dollar here and abroad. This view is justified, but there are many caveats to supporting it fully.

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