Oil is the largest single commodity traded on the international market. This international oil trade has always been in US dollars. These petrodollars create a high demand on the international currency market for dollars and helps support the value of the dollar.
If the USA should convert to another energy source, the international trade in oil would decline and so would the demand for dollars on the currency market. As the US international trade deficit widens, which also lowers demand for dollars, combined with a possible declining international oil trade, a situation could arise which would make the bottom fall out of the value of the dollar.
Our dependency on oil goes far beyond the need for energy. How can the USA convert to another energy source and still maintain a strong currency?
2007-02-22
01:34:56
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Politics & Government
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