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Petrodollar UPSC NOTE


  • Petrodollars are crude oil export revenues denominated in U.S. dollars

  • Just as the petrodollar is not a currency, neither is it a global trading system

  • The wide use of the U.S. dollar as payment for crude oil reflects the traditional preferences of non-U.S. oil suppliers.

  • The term gained currency in the mid-1970s when soaring oil prices generated large trade and current account surpluses for oil-exporting countries.

  • Then as now, oil sales and the resulting current account surpluses were denominated in dollars because the U.S. dollar was—and remains—by far the most widely used currency. 

  • The U.S. dollar's global popularity does not depend on the good will of oil exporters. 

  • It is based on U.S. status as the world's largest economy and goods importer, with deep, liquid capital markets backed by the rule of law as well as military power.

Future of the US dollar

  • A growing group of observers and commentators has been forecasting the end of the U.S. dollar as the world’s reserve currency

  • Also, many of the pundits claim the Chinese yuan would be the one to usurp the coveted position of the world’s reserve currency.

  • The argument is built on two fundamental premises: 

  • 1) An apparent waning influence of the U.S. economy on a world stage in terms of favourable political and economic pacts as well as a decrease in the number of goods and services traded on a global scale using the U.S. dollar as its medium.

  • 2) An increase in the ambit of Chinese economic and political influence among its neighbouring States and other developing countries predominantly through the Belt and Road initiative.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Petrodollar UPSC NOTE
Petrodollar UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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