- 2024-08-13
- News
Saudi Arabia Ends Petrodollar Deal with US, Will Dollar Fall from Grace?
In recent days, a bombshell has suddenly spread online. It is said that the petrodollar agreement signed between Saudi Arabia and the United States 50 years ago has expired, and the leader of Saudi Arabia has decided not to renew it. This move is considered to be another decoupling of the dollar from its long-standing anchor, oil, following its decoupling from gold. Self-media has drawn the conclusion that the dollar will fall from its pedestal and the world will enter a brand new currency era.
Articles and headlines like these are not only explosive but also provide extremely high emotional value, stirring up the public's enthusiasm to the highest level, thereby gaining a large number of views and harvesting a wave of traffic.
In fact, in recent years, there have been many similar news. For example, not long ago, the U.S. debt ceiling limit was a hot topic, and many media outlets unequivocally stated that U.S. debt would default and the United States would be doomed.
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At that time, I told everyone that this was a partisan struggle between the two parties in the United States, and the U.S. debt ceiling limit would eventually be raised. The result was exactly as I expected, and those media that talked nonsense were all "slapped in the face" and stopped talking about it. Of course, they earned traffic fees by deceiving laymen, and they didn't lose.
This time, I will still clearly tell everyone that the petrodollar system will continue to exist. Even if the strength of the dollar is indeed gradually declining, the speed is quite slow, and in the next 20, 30, or even 50 years, the dollar's super-strong position cannot be shaken or replaced. Why do I dare to be so sure that the decoupling of the dollar and oil is nonsense? There are mainly three reasons.
First, there is no report in the domestic mainstream media about the non-renewal of the petrodollar agreement.
The United States and Saudi Arabia breaking up and not renewing the agreement to settle oil in dollars is definitely an explosive super big news. Any content like this will inevitably attract the attention of all official media on the Internet, and mainstream media such as CCTV, People's Daily Online, People's Daily, and Guangming Daily will definitely report and interpret it in multiple sections.
However, we have not found any large mainstream media to speak out, and all are self-media reprinting foreign news. Mainstream media do not mention this matter because they will not make up news out of thin air for the sake of traffic.
Second, the financial market does not buy it, and the dollar rises instead of falling.
Oil is an essential energy for the development of all countries in the contemporary era. Without oil, development is impossible, and to buy oil, one must use dollars. This is the reason why most people recognize the petrodollar. They believe that the dollar can become the world's currency because it is anchored to oil, and the dollar's hegemonic position is thus formed.Conversely, once the US dollar is decoupled from oil trade, it implies the arrival of a super bearish event, larger than any previous bearish event. The US dollar is bound to plummet in the financial markets.
What is the actual situation? In recent days, the US dollar index has not fallen but risen, while the exchange rates of various currencies have fallen.
The online news claims that the original agreement was signed on June 8, 1974, with a validity period of 50 years, expiring on June 8, 2024. Saudi Arabia announced on June 9 that it would not renew the agreement. Let's look at the trend of the US dollar index and the currencies of various countries in the following days.
On June 10, the US dollar index rose by 0.25%, and on June 11, it rose by 0.08%. In the two days after the news came out, the US dollar index was rising, and it only fell on June 12, with a drop of 0.56%. Is this because the financial market reacted slowly to the news of the US dollar decoupling from oil?
Not at all, the decline of the US dollar index on that day was due to the release of the US CPI data for May, which was better than expected. The market believed that US inflation was further controlled, and the probability of interest rate cuts increased. On the following June 13 and 14, the US dollar index rose again, increasing by 0.53% and 0.34%, respectively.
How about the performance of other currencies? Since June 9, the offshore renminbi has depreciated from 7.26 to 7.27 per US dollar; the euro has depreciated from 1.08 to 1.07; the yen is the most exaggerated, on June 9, 156.7 yen could be exchanged for 1 US dollar, and on June 14, at most, 158.2 yen were needed to exchange for the same 1 US dollar.
The US dollar is going to decouple from oil and fall from the altar, but other currencies are depreciating, and the US dollar is not depreciating but appreciating. What is the reason for this counter-logical phenomenon?
The answer is not complicated, the so-called super big news is simply fabricated, and financial professionals in the financial market, like mainstream domestic media, disdain fake news.
Third, the agreement signed 50 years ago did not mention that oil should be settled in US dollars.
The agreement signed that year can still be found on the official website. On June 9, 1974, news reports stated that the day before, that is, on June 8, the United States and Saudi Arabia signed an agreement titled "Wide-range Military and Economic Agreement", which translates to a broad military and economic agreement in Chinese.The agreement does exist, and it was indeed signed 50 years ago, but the main content was that the US and Saudi Arabia would establish four joint working groups to promote cooperation between the two countries in agriculture, technology, education, and industry. There was no mention of oil being settled in US dollars.
It seems that even the source of the news is wrong, so what else is there to say?
These three points fully illustrate how ridiculous the news is that the so-called oil-dollar agreement will not be renewed, leading to the decoupling of the US dollar from oil trade, and even causing the US dollar's hegemonic status to fall. It is completely a fabrication by some domestic and foreign self-media.
In addition, many people may only know that Saudi Arabia and Russia are major oil-producing and exporting countries, but the United States is also one. In 2023, the United States produced an average of 12.9 million barrels of oil per day, ranking first in the world. Russia ranked second with a daily production of 10.1 million barrels, Saudi Arabia ranked third with 9.7 million barrels, and the fourth place was Canada, a close ally of the United States. According to a report by Russian media in 2019, the United States will surpass Russia to become one of the world's largest oil exporters before 2024.
To take a step back, even if Saudi Arabia's oil is no longer settled in US dollars, as the world's largest oil-producing and exporting country, the oil produced by the United States can still keep the US dollar linked to oil.
The current network is filled with all kinds of shocking news, many of which are logically confused and far from the facts but cater to the public's taste. Due to the scarcity of independent thinking and judgment abilities, most people do not possess them, so it is common for the news to be completely opposite to the actual situation (such as the financial market).
In the past, some people made money by exploiting information disparities, and now there are still people making money by fabricating stories to deceive the public.
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