Nov 20 2007
OPEC Move Wouldn’t Budge Dollar
Iran and Venezuela have proposed that OPEC move off the U.S. Dollar as its currency of choice for pricing crude oil, but it’s not going to happen. The political move is designed to further destabilize the damaged dollar, but isn’t getting any traction from Saudi Arabia–the linchpin of any OPEC decision. (See our last story on the subject.)
Steve Hargreaves, CNNMoney.com staff writer, has a good story on the subject, with some nice reporting on what the effects of OPEC going off the Dollar. From Hargreaves’ story:
The effect that switching from pricing oil in dollars to euros might have on the American currency is hard to say, but it’s possible it could further drive down the value of the dollar and hence make oil more expensive for U.S. customers.
“That’s the political weapon Iran and Venezuela are trying to leverage,” said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.
The amount of oil OPEC sells on the world market is somewhere around $1.5 billion per day, said Jeffrey Currie, the head of commodity research at Goldman Sachs in London.
Compare that, he said, to the more than $3 trillion that change hands in currency markets every day.
“You’re talking about a value that’s just too small to show up on the radar screen,” said Currie. “It isn’t enough to materially change the currency markets.”
So it’s basically a smoke screen thrown up by the leaders of countries that don’t like the U.S. to further cast doubt on the Dollar. Don’t bet on it actually happening.
[See our other stories on currency issues.]
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[…] The move would not be unprecedented. Kuwait dropped its U.S. Dollar peg in May. OPEC is also considering dropping the dollar in favor of a basket of currencies, as we’ve written about earlier this month. The U.A.E.’s move is unlikely to upset the U.S. applecart just as the OPEC move is similarly unlikely to. […]