CNBC just did a segment about the chance of oil being traded in euros and if it happened, what some of the consequence might be.
What makes this amusing is that I started writing about this in November 2004 and, this just in, I'm not the one who first came up with the idea.
I do not know if CNBC has ever talked about this before but it is important to be in touch with. To be clear, oil will not one day switch from dollars to euros. The more reasonable scenario would be some small sliver of oil might trade in euros between two non-US parties as a function of convenience.
The big macro to this is that it seems reasonably logical (even if it never happens) that oil could trade in euros. Assuming it starts small and stays small it creates a path to less demand for dollars.
This type of shift would happen very slowly. Fair enough to anyone that sees no chance of this but that is not how I see it.
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8 comments:
I thought by now that everyone knew that the U.S. went on war with Irak for the mere reason that Saddam wanted to open an oil market in Euro. Same reason why they are so eager to get back at iran lately and at the particular time.
That is a major reason why the French did not want to go to irak!
They need our dollars.
...Come on guys...
g
They need our $ ?
Maybe today, but if OPEC changes currency the Greenback will NOT be needed to the extent it is today! And, you would probably be shocked how quickly that minor change would compound the buck's weakness.
I'm no philosopher but I heard the only thing for sure is CHANGE itself..... I did sleep at a Holiday Inn Select last night.
I think that Irak is the same place as the other Iraq, all right ;-)
Cnbc has done a segment on this issue and there are a lot of moving parts. My recollection is that it is not in opec's interest to see oil get too highly price, ergo dollar falls and opec holds a lot of dollars. Ditto for the speculation of opec changing to euros. But, the mere speculation plays on a lot of fears and political intrique. Anyone read the book, The Economic Hitman? Covert operations make sure the rest of the world is very dependent on us. There is a hidden iron fist. Hell, i can't figure it out. Too many unknowns.
The dollar will fall. But don't count the US out. Who do you think is buying all that oil. WE will decide how we pay for it.
I'm as bearish as the next guy for the dollar in the long run. But these moves may be ON PURPOSE. They will lower our deficit. Make our goods cheaper for the world to buy ( in dollars ).
Hang tight guys. The sun will come out tomorrow.
g
Lots of anti americanism would want this, BUT the Europeans would go crazy if the Euro became so in demand.
The value of the Euro would skyrocket and the sale of cars, wine, etc. would take a nose dive.
No one like the US, but no one wants to take our place.
The Oil Drum just did a great piece - an interview with the guy who originally suggested the Mid East oil exchange. He talks about its vision, the politics and currency effects.
http://uk.theoildrum.com/story/2006/8/13/71557/8571
Paul
Oh, the cost of being the Big Dog on the block. How soon we forget the impact of 9/11 and mouth the latest conspiracy theories for IRAK(sic) and other sick templates from such well known bastions of truth and objectivity such as Pravda and Al-Jazeera.
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