The "Petrodollar" and "wars for oil"

[All Along The Watchtower]

Stop me if you've heard something like this before:

"The secret to the strength of the US economy and global hegemony is that oil is denominated in dollars, rather than Euros or yuan or gold or Bitcoin; this is why the US-Saudi alliance is so critical."

Or simply,

"The US invaded Iraq to take their oil, and that's why they're opposed to Iran."

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This is all so economically and historically illiterate it's honestly "not even wrong." But it begs a serious question: what is it about oil specifically that makes people--including otherwise reasonable and informed people--start talking conspiratorially in deranged terms, akin to survivalists stuffing gold under their mattresses in their bunkers?

Do people (other than obvious nutters) talk this way about rubber, lithium batteries, food, fresh water, etc.? Because I haven't seen it.

[parochial boy]

The dollar functioning as the global reserve currency does give some big advantages to the USA over all though. For instance it means that other countries have to buy US dollars - which leads to an inherent stability in the dollar and relatively reliable access to import markets as well as ensuring a capital inflow to the US that allows it to finance its budget and current account deficits. As well as some less tangible advantages like those it confers on US banks or how it gives the US political weight.

Or more to the point, it's pretty easy to come up with conspiracy theories about this sort of thing because it's easy to imagine how the dollar losing its status being absolutely catastrophic for the US economy. Oil is presumably the top one that people think of because of the degree to which it has been the perceived global economic motor in recent decades.

Not that the US dollar functioning as global reserve currency isn't without its advantages to other markets though. I mean, imagine if oil was traded in bitcoin...

[Benjamin Frank]

Stop me if you've heard something like this before:

"The secret to the strength of the US economy and global hegemony is that oil is denominated in dollars, rather than Euros or yuan or gold or Bitcoin; this is why the US-Saudi alliance is so critical."

Or simply,

"The US invaded Iraq to take their oil, and that's why they're opposed to Iran."

---

This is all so economically and historically illiterate it's honestly "not even wrong." But it begs a serious question: what is it about oil specifically that makes people--including otherwise reasonable and informed people--start talking conspiratorially in deranged terms, akin to survivalists stuffing gold under their mattresses in their bunkers?

Do people (other than obvious nutters) talk this way about rubber, lithium batteries, food, fresh water, etc.? Because I haven't seen it.

You are correct that people don't talk in the same way about all those things, mostly I think because oil is the most valuable and has the most sensational history ('There Will Be Blood'...) but, in fact, most commodities and not just oil are traded on the world market with the U.S dollar.

I agree that the war for oil stuff is conspiratorial nonsense specifically but...

1.Parochial Boy is absolutely correct but doesn't go far enough. Obviously it's impossible to know for sure, but it's reasonable to speculate that without the boost that the U.S dollar receives from being both the 'Petrodollar' and the world reserve currency, given the enormous U.S government budget deficit and debt, that the U.S dollar value would collapse relative to other currencies and the IMF would have to come in and impose austerity on the U.S financial system.

2.While it's hard to find much evidence that the U.S engages in 'war for oil' stepping back a bit I don't think anybody can dispute that the U.S keeps a military presense all over the world in order to protect its interests, including protecting nations where the U.S has oil interests (both for the private U.S oil companies who have concerns in these nations and to protect U.S oil flows.)

3.On the history, while this does go back a long way now, it's also beyond dispute that the U.S government overthrew the (semi) democratic government in Iran and brought back the Shah at the request of U.S (and British) oil companies.

So, with respect, it's you who is wrong on the history and economics of oil.

[darklordoftech]

I think oil has long been associated with greed.

[Clarko95 📚💰📈]

It's very strange why the obsession is about oil, considering the United States was a rising economic superpower and major financial player long before it became a net importer of oil in the 1950s. No doubt it obviously helps, but also not hard to see the United States remain the global economic top dog even without all the oil politics.

[lfromnj]

It's very strange why the obsession is about oil, considering the United States was a rising economic superpower and major financial player long before it became a net importer of oil in the 1950s. No doubt it obviously helps, but also not hard to see the United States remain the global economic top dog even without all the oil politics.

The US was the top dog during the leadup to WW2 partially due to our oil production capacity. The US produced somewhere around 70% of all oil in the world. Anyone who wanted a motorized army would have to use fuel from the US. Thats why the Japanese felt they had to invade outwards as we did an oil blockade of them to limit their war in China.

[Clarko95 📚💰📈]

It's very strange why the obsession is about oil, considering the United States was a rising economic superpower and major financial player long before it became a net importer of oil in the 1950s. No doubt it obviously helps, but also not hard to see the United States remain the global economic top dog even without all the oil politics.

The US was the top dog during the leadup to WW2 partially due to our oil production capacity. The US produced somewhere around 70% of all oil in the world. Anyone who wanted a motorized army would have to use fuel from the US. Thats why the Japanese felt they had to invade outwards as we did an oil blockade of them to limit their war in China.

Well the word "partially" is kind of my point about the obsessive focus on oil. The U.S. is a highly productive and innovative economy with abundant other resources other than just oil in addition to a large population. Even if the U.S. had practically zero oil production, it would probably still have grown very rapidly to challenge and then eventually overtake the United Kingdom as the major financial hegemon and reserve currency.