What I Learned This Week

The coming twilight of the petrodollar: will the petroyuan become America’s new problem?

Many countries have long sought to reduce the role of the dollar as the world’s principal reserve and trading currency. The BRIC countries, in particular, have been trying to maximize bilateral trade using their own currencies for payment. China now appears to be moving to undermine the U.S. dollar’s traditional role in the energy market by moving oil payments from dollars to yuan, underscored by the fact that China is already the world’s largest petroleum importer (see chart below) and is likely to remain the major driver of incremental global oil imports well into the future. If China is successful in forcing oil producers to accept payment in yuan, it would ultimately gain more global eco…

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