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The new geopolitics of crude oil March 12, 2008

Posted by tkcollier in Economy & Business, Geopolitics.
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Khaleej Times Online – The new geopolitics of crude oil
View from a Dubai banker via Carlton Palmer – Last week was a defining moment in international relations. West Texas and North Sea Brent crude oil, the world’s light sweet crude benchmarks, soared to $105, above its inflation adjusted 1979 price of $92, when the Shah was overthrown in the Iranian Revolution and a buyer’s panic traumatised the Rotterdam market for spot tanker cargoes. While the immediate cause of the oil surge was an unexpected fall in US inventories and Opec’s failure to heed Bush’s call to boost production, black gold has become a hedge against the dollar, a new global currency of wealth and power, as the exponential increase in the numbers of Russians in the Forbes Global Billionaire list suggests.

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1. Bobby Hawk - March 20, 2011

What most Americans do not understand is that the US currency is backed by commodities, not gold. It became the world currency for trading in oil because it was the most stable at the time. The ownership of the title “world currency” is always under struggle. Prior to the US becoming the world currency it was the British pound that was accepted world wide.

The value of US currency at this specific point in time is largely due to the price of Oil. Other commodities are included however oil is the highest. Every single oil purchase in the middle east, for instance is made in US dollars. This is the reason most countries will purchase our bounds because they know that the volume of trading in the world is based on US dollars.

Most people simply do not understand the economics behind the dollar. They do not understand the commodities which back the US dollar and give it value.

Every major nation in the world would like the seat of world currency. The Russians and the British have been fighting with the USA for years to take this crown. Being the international currency Its akin to playing a huge chess game that is each day with one attempting to undermine the other while keeping the markets from completely crashing.

The Russians want this position and they feel its their turn at the wheel. They will do all within their power to take this financial position from the USA. And don’t downplay the British, they would love to have the position of world currency back. Then there are the Chinese who are eager players in the game, along with the Japanese. If these two pool resources along with South Korea, they could most likely pull off a coup against the USA as world currency. Russia could do the same if it could gain a foot hold on oil sales to the EU. If the Russians sell oil to the EU because oil is shut down or interrupted in the Middle East, then they could force a change in the accepted oil trade currency overnight. The result would be hyperinflation in the USA and complete market panic. The Russians would stand to gain from this as well as the US oil reserves are under reported. The Russians would love to take advantage of a weakened USA where they could take Alaska and its oil reserves.


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