Building a world of
resilient communities.



OPEC mulls move to euro for pricing crude oil

Calgary — OPEC is considering a move away from using the U.S. dollar — and to the euro — to set its price targets for crude oil, the highest-profile manifestation of the debilitating effect of depreciation on the greenback's standing as the currency of international commerce.

Several members of the Organization of Petroleum Exporting Countries are seeking formal talks on using the euro, as well as the U.S. dollar, when determining price targets for crude, a senior oil minister within the cartel said Monday. “There are countries that are proposing this,” Venezuela's Oil Minister Rafael Ramirez said in Caracas. “It's out there, under discussion.”

Mr. Ramirez did not specify which OPEC members are pushing the proposal, but much of the impetus is believed to come from Persian Gulf producers.

They have seen their purchasing power in Europe pinched as the U.S. dollar loses ground against the euro — including touching a record low Monday.

Any move to water down the use of the U.S. dollar as the currency would have enormous symbolic impact, said one prominent Canadian energy analyst.

“On a symbolic level, I think it's huge, not only for what it says about the U.S. dollar, but also the implied change to the nature of energy trading worldwide in the future,” said Wilf Gobert, vice-chairman of Peters & Co. Ltd.

Beyond the blow to the greenback's prestige, a move by OPEC to even partly price in euros would ensure that any further depreciation in the U.S. dollar boosts oil prices, Mr. Gobert said. And any country — not just the United States — using the U.S. dollar for pricing would see the cost of the commodity rise as that currency fell.

Indeed, while OPEC has yet to make any formal break with the U.S. dollar, its refusal to boost output has already offloaded much of the cost of the dollar's depreciation on to the American economy. Mr. Gobert said oil prices at the end of last month, about $32 (U.S.) a barrel, would have been much lower if not for the decline in the value of the U.S. dollar over the past 24 months. Using the exchange rates of the dollar versus the euro two years ago, crude would be selling for $22 a barrel instead, he said.

All of the oil prices used in OPEC's benchmark index, or basket, are currently denominated in U.S. dollars.

The cartel uses that index as the basis of its price-band policy, whose stated intent is to adjust output so the basket hovers within a $22-to-$28 range.

Oil prices have lingered well above that maximum for 26 consecutive trading sessions, which in theory means that OPEC should have increased its output by 500,000 barrels a day to lower prices. But the cartel has ruled out doing so before its regularly scheduled meeting on Feb. 10, arguing that it is the depreciation of the U.S. currency — not a lack of supply — that is fuelling the rally in crude prices. Monday, crude for February delivery rose 41 cents to $34.72 a barrel on the New York Mercantile Exchange, a 10-month high.

Mr. Gobert said he believes it is unlikely that OPEC will opt for a formal split with the dollar, although the cartel may very well accomplish the same effect by raising its price band, he added.

But he said that OPEC's musings about adopting the euro are part of the increased chatter about the rising value — and influence — of the five-year-old currency among commodity traders and analysts

What do you think? Leave a comment below.

Sign up for regular Resilience bulletins direct to your email.

Take action!  

Find out more about Community Resilience. See our COMMUNITIES page
Start your own projects. See our RESOURCES page.
Help build resilience. DONATE NOW.


This is a community site and the discussion is moderated. The rules in brief: no personal abuse and no climate denial. Complete Guidelines.


Peak Oil Notes - Nov 27

A midweek roundup. There has been a lot of news to move the oil markets in …

The "Syrian Sickness": What Crude Oil Gives, Crude Oil will Take Away

Crude oil had created modern Syria, crude oil has destroyed it.

Drought Influenced Syrian Civil War; So What, Says U.S. Congress

This singular thought, that climate change can stir dangerous human …

Peak Oil Review - Nov 23

A weekly roundup of peak oil news, including: -Quote of the Week -Oil and …

Despite Low Oil Prices, Renewable Power Gaining Traction, Energy Agencies Report — But Not Yet Fast Enough for the Climate

The shift away from coal and towards renewable sources of energy is slowly …

Peak Oil Notes - Nov 19

 A midweek update.Oil futures fell as low as $39.91 a barrel in New …

Keeping warm with minimal heating: small-scale solutions

I discuss some of the ways you can add the equivalent of an extra layer of …