I’ve found it really baffling as to why petrol prices around Australia have gone through the roof since Russia invaded Ukraine on February 24th this year. I couldn’t see how we are so dependent on oil from Russia and why the difference between diesel and unleaded became so volatile.
Call me a cynic, but I do believe there may be a degree of opportunism by oil companies. however, I was intrigued to see a report recently by Crux News that looked at rising oil prices around the world and suggested that the real reason is politically motivated to destabilise the Petrodollar system and possibly reduce the strength of the US Dollar as an international currency.
No, I’m not a conspiracy theorist and I didn’t make up the word Petrodollars.
The emergence of the Petrodollar dates back to the early 1970s when the US reached an agreement with Saudi Arabia to standardise the sale of oil, based on the US dollar. Put simply Petrodollars are U.S. dollars paid to an oil-exporting country for oil, and they are the primary source of revenue for many OPEC (Organisation of Petroleum Exporting Countries) members and other oil exporters. These oil exporters settle sales in U.S. dollars because the US dollar is the most widely used currency, making it easier for them to invest in export proceeds.
So, when you consider that in 2020, global crude oil exports averaged approximately 88.4 million barrels per day and assuming the average price of a barrel of oil is US$100, that would generate an annual global petrodollar supply of more than $3.2 trillion a year, which is why I think you may find the following link to the Crux News story on the Petrodollar interesting.