China begins using Yuan for oil trades. Is this the end of the Dollar?

Today China’s Yuan-denominated crude oil futures contract began trading and it looks like it is off to a good start. This could be a death blow for an already weakening US Dollar, and the rise of the Yuan as the dominant world currency.

Since the United States stopped pegging its currency to gold in the 1970s, the Dollar’s value has depended massively on its use as an oil trade vehicle – the “petrodollar”, as its known. The petrodollar is what has given America global power and sustained preeminence in the world for the last few decades.

Today, Monday 26th March 2018, China has started to seriously challenge that dominance.

When major oil-producing countries, like Saudi Arabia, begin using the yuan for oil trades, we will likely see a strong and steady decline in the Dollar’s value. Buying power and living standards for most Americans will decrease.

However, it’s unlikely the petrodollar system will be fully replaced by an equivalent “petroyuan” system quickly. The Dollar’s monopoly on major oil sales will probably loosen gradually.

Image: Crude Oil Market Data 26/3/18,  Shanghai International Energy Exchange (ine.cn).

Related Posts

Add Comment

Discuss this article...

This site uses Akismet to reduce spam. Learn how your comment data is processed.