noop, you can buy and sell oil in whatever currency you wish. This urban myth of the left economics world (that there is some very great importance about the fact that oil is typically quoted in dollars) has its genesis in the fact that if you want to buy and sell petroleum or petroleum futures on an exchange, then you will usually find that the price is quoted to you in dollars per barrel. (actually, the Brent crude contract on London's IPE is still quoted in sterling, but there you go). But a) there's no law saying that you have to buy your petroleum on an exchange; if you phone up Shell and say you want to buy a load of oil for euros they will most likely sell you it (they will have a look at the curren $ price and the exchange rate first though). And b) so what anyway; if you have some euros and want to buy something quoted in $, it is not exactly difficult to find someone who will sell you $. Somehow, this issue about oil has got entangled with the more general issue of seignorage and US dollar hegemony (which I think there is a decent explanation of on Doug Henwood's site) and has been the source of a lot of avoidable error.
in other words your instincts are right; this supposed arrangement sounds weird because it doesn't actually happen that way. best dd -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of jeff sommers Sent: 16 February 2005 18:51 To: PEN-L@SUS.CSUCHICO.EDU Subject: Oil & dollars Hello! Question regarding oil and dollars. I understand the logic behind petrodollar recycling, where rich oil producers parked their wealth in the US, thereby mitigating US deficits and helping the latter prosper. But, I am somewhat unclear on oil pricing in dollars. Do the major producers ONLY accept US dollars in payment? I know the Saudis cut a deal with Kissinger regarding this, but how does it work in practice. Must oil be paid for in dollars and what prevents oil producers from taking other currencies? Thanks, Jeff
