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Pol/Econ: The Last Days of the PetroDollar
Garrett Johnson, Bits of News
The news came out yesterday when few would notice.
CARACAS (Reuters) – OPEC is likely to discuss creating a basket of currencies for oil pricing at its next summit due to the steady decline in the dollar, Venezuela’s Energy Minister Rafael Ramirez said on Friday.
“The need to establish a basket of currencies … will probably be a point of discussion in the next OPEC summit,” Ramirez told reporters during an evening event in the presidential palace.
“The dollar as a benchmark currency has been weakening quite a lot and it creates distortions in oil markets.”
While disturbing, it wouldn’t mean much except for the fact that this is merely the latest step in a trend away from the dollar by OPEC nations. For example:
- UAE central bank diversifies away from dollars
- Kuwait unhooks the currency peg to the dollar
- Syria (not an OPEC nation) unhooks currency peg to the dollar
- Saudi Arabia refuses to cut interest rates with Federal Reserve
- Iran sells oil in Euros
- Venezuela currency peg is in danger, and plans to sell oil priced in Euros
The question is: why does this matter?
(29 October 2007)
Links and a long explanation at the original. -BA
Record Oil Prices and Washington’s Desire for Energy Independence
Michael Piskur, Power and Interest News Report (PINR)
Steadily increasing U.S. oil consumption is coinciding with declining domestic production to create an ever greater dependence on imported energy. It is not likely that the U.S. ethanol industry will be capable of countering demand of oil for decades, particularly with the modest increase in renewable fuel production recommended by the Bush administration. Similarly, unconventional fossil fuels will have little impact on the U.S. “addiction to oil.” Barring a major technological breakthrough, talk of energy independence in Washington is merely rhetoric meant to attract votes and appeal to nationalist sentiments.
Future regulation of greenhouse gases will greatly impact the viability of unconventional fuels and biofuels. Whether Washington decides to impose mandatory caps on carbon emissions or seek a market-based approach, the shape of the global framework to succeed Kyoto will ultimately decide the fate of these nascent industries. In the short term, with U.S. energy independence an unrealistic goal, increased efficiency and an overall reduction of consumption are the most practical means for reducing dependence on foreign oil.
(29 October 2007)
Are oil prices at their highest?
Pinpointing the all-time inflation-adjusted record for oil prices is nowhere near as exact as it might seem.
…The federal government says prices still haven’t exceeded the January 1981 inflation-adjusted record of $93.09. The Paris-based International Energy Agency says the actual record was in the previous spring and is $101.70 in today’s dollars.
Some economists and analysts agree, but others say prices already reached a new milestone, depending on which number they pick as the previous high and how they adjust it for inflation.
“The bottom line is, real oil prices certainly peaked in the spring of 1981. The question is, have we hit the new record yet?” said Barton Smith, an economist at the University of Houston.
The Energy Department’s Energy Information Administration says no, but acknowledges its stance is as much art as science.
“It’s nice to have one definitive number, but it’s a messy world we live in, and data is not always available. To go back in time to what we have now is difficult,” EIA spokesman Jonathan Cogan said.
(28 October 2007)