4 ms·

> OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil

by rayiner 6mo ago

> OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil. Has anyone ever quantified the benefit the U.S. supposedly gets from dollar denominated oil? How does that compare to the cost to the U.S. of paying cartel pricing for oil? Given that the U.S. is a huge oil consumer, surely the cost to it of cartel pricing in oil is huge.

watwut 6mo ago
Paul Krugman consistently claims that there is not much benefit from it that would be visible in data. That seems to me consistent with what economists say in general. If there is benefit it is small. It is mostly symbolic - petrodolar is a symbol of a power and people react to it.
hollerith 6mo ago
The US is a huge oil consumer, but these years it basically produces all it needs domestically, so even if the rest of the world (inexplicably) started turning their noses up at dollars, nothing significant would change about the US's oil supply. Also, I think the situation has changed drastically from the 1970s and that OPEC has very little influence on the price of oil. The West's decision to punish Russia for the invasion had a much bigger influence than OPEC has these years. Some one is going to respond to me with the assertion that US refineries on the Gulf Coast are specialized for refining heavy crude and cannot handle the very light crude produced domestically (or alternatively cannot efficiently produce diesel fuel and similar from the very light crude). I think the situation is more that the Gulf Coast refineries can make more money refining heavy crude, so a lot of heavy crude from other countries flows to the US Gulf Coast (and once it is refined, those refinery products get consumed mostly in the US because it would be inefficient to ship them overseas). But in exchange a lot of US-produced crude gets shipped overseas to refineries that aren't as capable as US refineries are, but that is OK because very light crude is easy to refine. The point is that the US produces slightly more crude that it uses, and could become completely self-sufficient in petroleum products after an adjustment period. Yes, the adjustment period might cause temporary shortages and be quite painful to investors long on Gulf Coast oil refineries, but it would probably not be a big deal in the grand scheme of things.

by rayiner 6mo ago

watwut 6mo ago

Paul Krugman consistently claims that there is not much benefit from it that would be visible in data. That seems to me consistent with what economists say in general. If there is benefit it is small. It is mostly symbolic - petrodolar is a symbol of a power and people react to it.

hollerith 6mo ago

The US is a huge oil consumer, but these years it basically produces all it needs domestically, so even if the rest of the world (inexplicably) started turning their noses up at dollars, nothing significant would change about the US's oil supply. Also, I think the situation has changed drastically from the 1970s and that OPEC has very little influence on the price of oil. The West's decision to punish Russia for the invasion had a much bigger influence than OPEC has these years. Some one is going to respond to me with the assertion that US refineries on the Gulf Coast are specialized for refining heavy crude and cannot handle the very light crude produced domestically (or alternatively cannot efficiently produce diesel fuel and similar from the very light crude). I think the situation is more that the Gulf Coast refineries can make more money refining heavy crude, so a lot of heavy crude from other countries flows to the US Gulf Coast (and once it is refined, those refinery products get consumed mostly in the US because it would be inefficient to ship them overseas). But in exchange a lot of US-produced crude gets shipped overseas to refineries that aren't as capable as US refineries are, but that is OK because very light crude is easy to refine. The point is that the US produces slightly more crude that it uses, and could become completely self-sufficient in petroleum products after an adjustment period. Yes, the adjustment period might cause temporary shortages and be quite painful to investors long on Gulf Coast oil refineries, but it would probably not be a big deal in the grand scheme of things.