For the last 50 years or so, oil has been traded exclusively in dollars. Oil-exporting countries receive dollars for their exports, making their economies dependent on the value of the American currency. History Of The Petro-Dollar System The petro-dollar system has its roots in the historical gold standard system. After the Second World War, with most of Europe in disarray, the United States held the bulk of the world’s gold supply. In a bid to both rejuvenate the global economy and position itself as a world leader, the U.S. agreed to redeem any dollar for its value in gold if other nations pegged their own currencies to the American dollar. At the 1944 Bretton Woods conference, 44 allied nations signed on to the deal offered by the Americans and formally established the U.S. dollar as the world’s reserve currency. But in 1971, with the U.S. suffering from high inflation and a stagnating economy, many of the nations that had signed up to the gold standard asked to redeem their dollars for gold. After the run on American gold, President Richard Nixon removed the dollar from the gold standard system in order to protect whatever remained in the country’s gold reserve. Almost a decade later, the United States entered into a pivotal economic partnership with the Kingdom of Saudi Arabia, where they agreed to use the dollar for oil contracts. With Saudi Arabia becoming the largest exporter of oil in the world, the influence of the ...
