Just a few months ago, the petrodollar was an obscure topic primarily understood by professional investors, political strategists, and other subject matter experts. Now, the issue has been forced into the public consciousness as the current world order is under attack.
Recently, Scottsdale Bullion& Coin Founder Eric Sepanek sat down with Mike Broomhead of AZTV’s Arizona Daily Mix tv show to discuss the importance of the petrodollar, the threats it faces, and the uncertain future of the dollar as the global reserve currency.
The Petrodollar Standard
Oil’s nickname of “liquid gold” isn’t just relevant to its inherent value and high demand. It also accurately explains the purpose behind the petrodollar. After abandoning the gold standard in 1971, the US turned toward the world’s most important resource: petroleum.
In exchange for military and financial support, the largest oil-producing nations agreed to trade oil exclusively in USD. This move effectively replaced the gold standard with the petrodollar standard. Every country in the world had to come through the US to buy oil which solidified the dollar as the world reserve currency…at least for over forty years.
The Rise of the Petroyuan
For the first time ever, the dollar is facing existential challenges to its dominance. The one-two punch of an anti-oil administration and an opportunistic China has dealt a significant blow to the dollar’s position. As the US government runs away from fossil fuels and its allies in the Middle East, the CCP is flexing its diplomatic muscles. Xi Jinping, the president of the People’s Republic of China, has struck historic peace deals in the region and even convinced Saudi Arabia to consider accepting yuan in global oil trade. Just a few months ago, China made the first purchase of liquid natural gas from the UAE in the yuan.
The Petrodollar: A Retrospective
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“This is a huge game changer…that everyone is going to feel eventually.”– Eric Sepanek, Scottsdale Bullion & Coin Founder
China’s end goal is to replace the petrodollar with the petroyuan which would establish the yuan as the world reserve currency.
De-Dollarization is Underway
China might be the most active threat to the petrodollar, but it’s certainly not the only country seeking de-dollarization. The rapid acceleration of de-dollarization is underway as several countries such as India, Brazil, Russia, South Africa, and more are actively seeking to disassociate from the dollar.
The strength of the petrodollar system is dependent upon the confidence the world has in the dollar. As people start to see the dollar as a risk instead of an asset, the whole system teeters on the verge of collapse. A complete disruption to the current financial structure will send shockwaves through the global economy, but Americans will suffer the brunt of the damage.
The Impact of a Petrodollar Collapse
For the first time in decades, American investors have to ask themselves: What if the US wasn’t number one? The fallout from the collapse of the petrodollar could be devastating for the domestic economy. The value of the dollar could plummet, tanking the trillions of dollars Americans have in banks. Investments in traditional markets could also suffer as fiat-backed assets nosedive. In short, anything built on top of the dollar is vulnerable if the petrodollar standard ends.
Returning to the Gold Standard
With the petrodollar standard on the ropes, the world seems to be headed towards a return to the gold standard. Central banks are buying gold at record rates, gold supplies are struggling to keep up with demand, and retail investors are hedging against economic uncertainty. This historical status as a global standard of money isn’t a fluke. Gold’s inherent value translates to less volatility and greater price stability.
“Gold has always been a standard of money worldwide.”– Eric Sepanek
Its continuous use over millennia has proven it to be a reliable store of value in the long run.
👉 related reading: Silver Shortage 2023? Why Global Silver Demand is Outpacing Supply
Stay Informed, Stay Protected
The days of dollar dominance appear numbered. The petrodollar standard is cracking, and countries are actively shifting away from the dollar. The key for investors is to stay up to date on these momentous changes so they can make informed investment decisions.
That’s why we’ve put together an in-depth Petrodollar Report and regularly updated our De-Dollarization Timeline to make it easier for you to stay in the know. Check out these free and valuable resources to protect your wealth.