The End of the Petrodollar

Iran completely controls the Strait of Hormuz. There is nothing the US can do about it. Iran’s policy going forward is to prohibit oil tankers from hostile nations going through, and others will have to prove that their cargo was paid for in Yuan and not dollars. What this will do is allow Iran to regulate the price of oil in world markets, which is what the US has been doing since the 70’s. It will also end the hegemony of the “petrodollar” which is the basis of the whole hyper-financialization of the US economy. My AI gives a pretty clear explanation of the petrodollar:

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The petrodollar is not a distinct currency; it is a term for U.S. dollars paid to oil-exporting countries in exchange for crude oil.

Investopedia +1

The “petrodollar system” refers to the global practice of pricing and trading oil exclusively in U.S. dollars, which has served as a cornerstone of American financial dominance since the 1970s.

Robbins Research International +1

How the System Works

Dollar Pricing: Major oil producers, particularly those in OPEC, agree to price and sell their oil only in U.S. dollars.

Global Demand: Because oil is a vital global commodity, every country must maintain large reserves of U.S. dollars to purchase it, ensuring constant demand for the currency.

Petrodollar Recycling: Oil-exporting nations often earn more dollars than they can spend domestically. They “recycle” these surpluses by investing them back into U.S. Treasury securities, stocks, and real estate.

U.S. Benefits: This cycle allows the U.S. to finance large trade deficits, keep interest rates lower, and maintain the dollar’s status as the primary global reserve currency.

Robbins Research International +5

Historical Origins

End of Gold Standard: In 1971, President Richard Nixon ended the dollar’s convertibility to gold, causing the currency’s value to drop.

1974 U.S.-Saudi Agreement: To stabilize the dollar, the U.S. struck a strategic deal with Saudi Arabia. The Saudis agreed to price all oil sales in dollars and invest surpluses in U.S. debt.

Security Exchange: In return, the U.S. provided Saudi Arabia with military protection, advanced weaponry, and access to American financial markets.

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Now it has been shown that the US cannot provide military protection from Iranian attack. So the US protection racket in West Asia is over. Saudi Arabia and the Emirates will have to sell their oil in Yuan. At his point they have joined the US and declared war on Iran. It must not have sunk in yet that the real power in the region is Iran, as it used to be before the 70’s and the petrodollar system was set up.