A hot topic in today’s world is the history and agreements of Petrodollar History. The ongoing conflict between Russia and Ukraine has sparked more discussion and increased its importance.

Simply put, Petrodollars are dollars that paid in exchange for oil. So, if you want to buy oil from Saudi Arabia, you must pay in dollars. If you don’t have dollars and want to pay through another method, it’s not possible. According to the agreement between Saudi Arabia and America, you must exchange dollars for oil because they have a Petrodollar agreement with the USA.

History of PetroDollar

In 1971, America’s president was Nixon. At one point, he announced that instead of gold, America’s dollar would be the main standard for economy. Nixon’s announcement became famously known as the “Nixon Shock.”

During World War II, fearing Hitler, allied powers began sending their gold to America. At that time, Americans told them, “Let the gold stay with us, you can take dollars instead. Use dollars as reserve currency. Then print your own domestic currency against it.

Many say our country’s reserve costs billions of dollars. However, if these US dollars collapse, their value in reserves will decrease. This is called fair value.

PetroDollar History and Agreement

Anyway, in 1974, they made an agreement with Saudi Arabia on Petrodollars. Saudi Arabia sells least 10% of the world’s oil demand. With this agreement, Saudi Arabia will only sell oil in exchange for dollars. Saudi Arabia agrees to this. In exchange, Saudi Arabia will receive various types of support from the United States. We can call this the history and agreement of Petrodollars.

Now many may wonder if Saudi Arabia actually sets the price of oil. Saudi Arabia sells oil, but uses Petrodollars as the payment method.

That’s why oil prices in different countries are regularly changed. Since oil transactions directly involve Petrodollars or dollars, almost all countries depend on Petrodollars. If the value of this dollar rises against the domestic currency, importing countries have to pay more money. In that case, the exporting country benefits quite a lot.

On the other hand, if the value of Petrodollars decreases against the domestic currency, importing countries benefit. In that case, the exporting country suffers a little loss.

More: Today Copa America Match

Because of these Petrodollar History agreements, almost every country has to align their economic policies with America’s monetary policies.