The Price of Oil

[Phoenix]

I pay a nice man in £'s to fill the oil tank at the end of my garden......Does that help?

[ALM]

However if you front up and ask for the value of your money in oil you will most likely get looked at like you were a gimp

Mailman, your gimp analogy and use of phrases such as 'front up' suggest that perhaps your understanding of foreign exchange markets is around the zero mark.

If the US Dollar is suddenly no longer the currency used to trade $100Billions of oil yearly, it doesn't take a genius to figure out that the demand for that currency will surely fall drastically. This will in turn force US interest rates upwards, consumer demand downwards, curb domestic investment expenditure and raise imported raw materials prices. The US economy will be left reeling.

Although I studied economics to degree level, I don't claim to be an expert. However, you have to trust the rest of us when we say that you really are talking out of your arse on this one!

[AlfredJPruffock]

This gets funnier, MM consider the case of Iraq who had established a bourse and were selling Oil in Euros , after the invasion they are now selling Oil in PetroDollars.

Why do you think that is ?


In November 2000, Iraq stopped accepting U.S. dollars for its oil. Counted as a purely political move, Saddam Hussein switched the currency required to purchase Iraqi oil to the euro.

Selling oil through the U.N. Oil for Food Program, Iraq converted all of its U.S. dollars in its U.N. account to the euro. Shortly thereafter, Iraq converted $10 billion in its U.N. reserve fund to the euro.

By the end of 2000, Iraq had abandoned the U.S. dollar completely.




PS Sound points ALM the US economy would surely be reeling if the petrodollar was to be upsurped for the reasons you gave

[Mailman]

If the US Dollar is suddenly no longer the currency used to trade $100Billions of oil yearly, it doesn't take a genius to figure out that the demand for that currency will surely fall drastically. This will in turn force US interest rates upwards, consumer demand downwards, curb domestic investment expenditure and raise imported raw materials prices. The US economy will be left reeling.

Demand for the dollar does not equal investment in the economy.

If anything the several trillion dollars worth of dollars held by overseas interest is a debt burden (since America has to honour this debt if, for example, King Ubdulla Bin Aye-rab, fronts up with a billion dollars worth of notes and wants to convert them to some other financial instrument).

Again, the important part is what happens with any profit made from oil investment...because this is what makes the world go round, not the front end you goons seem to be stuck on

But then again, you think Eorope is going to be so keen to trade with Iran if Iran continues to snub them over the development of their nuclear arms program?

Whether a barrel of oil costs $66, £45 or 3 tons of sea shells* is not important. For example, Canada moving from imperial to metric measurements did not change the length of the mile. The same with Eye-ran moving from dollars to euros (or pigs foreskins for all I care) is not going to change the value a barrel of oil OR the value of the US dollar. Its the investment that comes after it that makes the difference.

I know, Im probably talking about some concepts here that are beyond your simple mind...but there we go

Mailman

*based on current exchange rates.

[Mailman]

This gets funnier, MM consider the case of Iraq who had established a bourse and were selling Oil in Euros , after the invasion they are now selling Oil in PetroDollars.

Probably more to do with who is running the country. If England was running Iraq then Id expect everything to be sold in pounds. If NZ was then Id expect Peso's

Mailman

[bfg]

I wonder

2000 Iraq prices oil in Euros.
2001 Euro gains 25% against the dollar.
2002 Inspectors make damn sure Iraq can't fight back.
2003 Iraq invaded.

[Mailman]

2002 Inspectors make damn sure Iraq can't fight back.

for the love of alah, if you are going to come up with some bullsh1t timeline at least make it believeable!

Mailman

[ALM]

Demand for the dollar does not equal investment in the economy.

Wrong! Demand for the Dollar directly influences Interest Rates which in turn directly influences US domestic investment expenditure. This is simply because, at higher interest rates, the returns on investment are reduced, making it unviable in many cases. Hence Investment expenditure falls. Look it up in any 'Idiots Guide to Economics' or the following link! http://www.tutor2u.net/economics/con...mec_theory.htm

But then again, you think Europe is going to be so keen to trade with Iran if Iran continues to snub them over the development of their nuclear arms program?

You are obviously unaware that this involves more than Iran. Saudi Arabia and Kuwait are also keen on trading their oil using the Euro. If they along with Iran do so, the Europeans, Chinese, Indians and Yanks will have no choice but to buy their oil using the Euro.

The same with Eye-ran moving from dollars to euros (or pigs foreskins for all I care) is not going to change the value a barrel of oil OR the value of the US dollar. Its the investment that comes after it that makes the difference.?

So what do you think oil trading nations do with the billions of dollars they accumulate from selling oil? Do you seriously think they exchange them all back into Saudi Dinars? No, they choose to hold a large part of this wealth in accounts at large US investment banks in the form of Dollars. If oil trade suddenly switches to the Euro, the value of the Euro will rise and US Dollar will inevitably fall. Revenues from oil will remain held in Euros if anything. No one will go out of their way to lose money by buying up depreciating US Dollars!

I know, I’m probably talking about some concepts here that are beyond your simple mind...but there we go.?

Mailman, if only saying something made it true, we'd all be wise rich men. Stick to delivering the mail and leave the economics to those blessed with at least half a brain!

[Mailman]

You are obviously unaware that this involves more than Iran. Saudi Arabia and Kuwait are also keen on trading their oil using the Euro.

You are probably unaware that the involvement of Saudi Arabia and Kuwait is an internet myth Mind you, funny how e-myths are quoted as fact these days

So what do you think oil trading nations do with the billions of dollars they accumulate from selling oil? Do you seriously think they exchange them all back into Saudi Dinars? No, they choose to hold a large part of this wealth in accounts at large US investment banks in the form of Dollars. If oil trade suddenly switches to the Euro, the value of the Euro will rise and US Dollar will inevitably fall. Revenues from oil will remain held in Euros if anything. No one will go out of their way to lose money by buying up depreciating US Dollars!

Sigh...another goon caught up in a fantasy world eh

Look, all you have done is just proved what Ive been saying all along in that what really matters is what is done with the dollars, euros, sea shells, pigs foreskins once the profits from oil sales are made. If the dollar falls and people are holding euros they will see good value for investing in the US.

Again, if anything...selling off USD and then holding euros will shift a major debt burden from America to Europe. Currently several trillion dollars worth of US notes are held by overseas interset. This represents a massive debt burden but here you are trying to tell me the EU would welcome such a debt?

Look, if you are going to want to do business in America you have to buy USD so you are going to have to convert all those euros to USD anyway. Given the economic forecast for 2006 and through to 2007 are looking very good for america where do you think people are going to want to invest their hard earned euros? Yes thats right me lad, America!

Mailman, if only saying something made it true, we'd all be wise rich men. Stick to delivering the mail and leave the economics to those blessed with at least half a brain!

Well its probably just as well you only supposedly studied economics to degree level and let those who actually know what they are talking about do their jobs (and no, Im not talking about those goons who present fantasy as fact on the internet ).

Mailman

[AlfredJPruffock]

Au contraire MM

You postulated that it had no significance to the US if the petrodollar was priced in an alternative currency, that is hogwash and several people on the site have put forward sound reasons why that is so.

You also claimied that you had evidence from leading economists to support your view, Im still waiting for that interesting infromation.