The petrodollar agreement with Saudi Arabia began in 1974, two years into Joe Biden’s first term as a United States senator. It ended this week, a half-century later, during Biden’s first term as U.S. president.
Among all the news stories that matter, few rank higher than this. It’s bigger than President Trump and Hunter Biden’s convictions, bigger than jobs reports and inflation numbers, and perhaps even bigger than the southern border crisis. The end of the petrodollar is the end of the United States as the world’s lone superpower.
Yet it is barely mentioned.
Until last week, the petrodollar was America’s dominance of the global economy. It solidified the oil industry as a thoroughly American industry in which other nations merely partook. In the way Henry Ford didn’t invent the car but rather invented the automobile industry, which brought cars to the masses, American titans like Charles Pratt and Henry Flagler and the great John D. Rockefeller didn’t invent oil refining. They invented the oil industry, which brought petrochemical products to the masses. The oil industry is American, and as much as it exists around the world in places like Venezuela and the Middle East, it is because Americans led the way.
Oil, as a global commodity, is American, thoroughly utterly American, and as such is traded globally in U.S. dollars, as it should be. Until now.
Here’s an analogy to understand the currency of oil trades: You are on vacation in a foreign country and want to purchase something. The seller tells you in English, because everyone seems to speak English, it costs NNN pesos, euro, Canadian, etc. But if you have $20 cash, it’s a deal. It saves you a monetary conversion. It is even a better deal. It is a win for you and for the seller. In a small way, it is a “win” for America as the American dollar replaces the local currency. In that tiny, $20 transaction, buying a trinket for mom from a street vendor, America won.
That happened in the tens of billions of dollars with oil every day.
Although the number has declined in the past 20 years, still more than half of the world’s reserve currency is in U.S. dollars. The petrodollar has been a stabilizing currency for the world since the entire world needs oil. Every nation has had to convert its currency to the U.S. dollar, making it the de facto global currency.
Thanks to Joe Biden, it’s all gone.
Our national debt stands at $35 trillion, $9 trillion of which was added in the past three years. Inflation is cumulatively 19 percent higher than when Biden took office. The entire Biden administration has made punishing the oil industry a priority. If America, the world’s largest oil producer is actively trying to end the oil industry, then why would other oil-producing nations use our dollars?
It is logical Saudi Arabia, the world’s second-largest oil producer, looks at the American dollar with increasing doubt. It is obvious Saudi Arabia looks at the American president with increasing disdain. While campaigning in 2020, Biden called Saudi Crown Prince Bin Salman “a pariah” and demanded accountability for the death of journalist Jamal Khashoggi in 2018. Two years later, with oil pushing $120 a barrel and U.S. inflation at 9 percent, Biden went groveling to Saudi Arabia, fist-bumping an unsmiling Prince Bin Salman, asking the kingdom to increase oil production. He refused.
Saudi Arabia has every intention of surpassing the United States in the global oil market and has the reserves and the domestic policy to do so. The kingdom will now trade its oil in its own currency. India and China, two of the world’s largest oil importers, will now convert their domestic currency into Saudi riyals, leaving America out of the transaction.
The debacle mirrors Biden’s disastrous Afghanistan withdrawal: decades of work undone and dismantled in one brief instant because of incompetence and stupidity with nothing to show for the investment, work, and toil. Gone.
Wall Street investors have an acronym to describe stock market growth despite a weak economy: TINA. There is no alternative. Investors have to put their money somewhere, so they might as well buy stocks, and that action, despite not having any pro-stock market intentions, did in fact boost pro-market. The same can be said of the petrodollar. There is no alternative. If you wanted oil, and everyone needs oil, you bought the dollar, and that action, despite not having any pro-dollar intentions, did in fact boost the dollar.
The petrodollar forced countries to deal with America and thus deal with American values of free markets and rule of law. The petrodollar eliminated outright bribery and theft on the international scale, something that happens routinely with other commodities. Retailers label coffee as “fair trade” and diamonds as “ethical” to indicate their production did not violate human rights. No one had to label oil as such because oil was traded in U.S. dollars.
Eighty dollars of oil is not the same as 540 Chinese yuan oil or 7,217 Russian ruble oil or 300 Saudi riyal oil. And neither is the dollar as a global commodity.
What will replace the petrodollar as a global, commodities-based currency? Likely the Chinese yuan. The Biden administration’s radical push to “go green” has only strengthened China, as my organization, Power The Future, documented in a congressional report. I testified before the House Ways and Means Committee on this very issue, but rather than discuss it, House Democrats chose to call me names. I can guarantee you Rep. Bill Pascrell, D-N.J., an 87-year-old bitter partisan who wagged his finger at me over “mean tweets” rather than discuss his trillions in spending to buy Chinese wind and solar, has no idea the petrodollar ended. I can guarantee you the useless staffers in his office have no comment on the matter.
Biden wants to forgo the oil industry and replace it with the Chinese green industry for something climate change existential crisis … as he himself would say “you know, the thing.” It is only a matter of time until America is hooked on Chinese green the way Americans are poisoned by Chinese fentanyl, and then China asks us to convert our currency to theirs for ongoing purchases. As America built the Saudi and Russian oil industries, we are now building the Chinese green industry.
This from the same people who will tell us “America First” is a form of hate speech.
The collapse of the petrodollar should not come as a surprise to anyone who has watched the past three-plus years of Joe Biden at the helm. America’s sovereignty is compromised at the southern border. American values are polluted with pro-Hamas, rabid antisemitism on college campuses and our streets. American rule of law is bastardized by a politicized DOJ and FBI. The American dollar is diluted. The end of the petrodollar is another domino to fall.
Some things are reversible. A Trump victory in November can reverse many, if not all, Joe Biden’s disastrous policies on fossil fuel development. A GOP House can stop the transfer of trillions to Communist China for expensive, inefficient, intermittent wind and solar. But the petrodollar is gone forever, and with it, America’s role in the world is diminished. Saudi dominance with Saudi values will begin to rise, making the world a little bit worse.