The current system of trading oil only with dollars was actually born in the 1970s through negotiations between the United States and Saudi Arabia.
There are many factors in the background, but one of the most important factors was the US dollar as the world's most widely used preliminary currency.
In 1971, the United States announced the Nixon Shock, which stopped turning to the dollar gold.
This has no longer been protected by gold, and the dollar's value fluctuates with market force.
At this time, the United States was looking for a way to protect the value of the dollar and to maintain it as a major currency of world trade.
In 1974, the United States established a system that used the dollar as a currency for oil trading through a private agreement with Saudi Arabia. According to the agreement, Saudi Arabia decided to receive oil exports only in dollars, and in return, the United States promised to militaryly protect the royal family of Saudi Arabia.
The system has been maintained since then, and other major crude oil exporters have followed the method of using the dollar as a currency for oil trading. This greatly contributed to the US dollar to continue to play an important role in the world economy.
However, this system is also the object of criticism. Some countries and observers argue that this system gives excessive economic benefits to the United States and causes oil exporters to expose the US's political and economic pressure. In addition, this system is criticized for limiting the diversity of international financial systems because it limits the use of other currencies as a currency for crude oil transactions.
The Patro Dollar system refers to a system in which crude oil exporters receive oil sales revenue in dollars and invest them in various forms of US assets. This system provides a series of advantages to the United States, but at the same time, it contains a number of problems.
1. Instability of currency value: Patro dollar prices in the dollar system are directly affected by the dollar value. When the dollar value falls, oil exporters will reduce their profits. As a result, oil exporters can be sensitive to US monetary policy, which can threaten their economic stability.
2. Economic dependence: Patro Dollar system makes the oil exporter closely connected to the US economy. This will increase the risk of the US economy and the economy of oil exporters is excessively affected by the US economic situation.
3. Excessive international influence in the United States: Patro Dollar system provides excessive influence on the United States. Since the dollar is essential for oil trading, the United States can have a big impact on the world economy through their monetary policy. This can make the world economy excessively dependent on the US understanding and priorities.
4. Lack of economic diversification of crude oil exporters: Patro dollar system can make crude oil exports excessively dependent on oil exports. This makes it difficult for these countries to pursue economic diversification and can increase the risk of changes in crude oil prices.
Because of these problems, some countries and observers insist on the reform of the dollar system. These arguments take a variety of forms, such as allowing other currencies to be used for crude oil or introducing a multi -currency system.
