OPEC to Ditch Dollar for Euro?
Posted by jonathanfryer on Tuesday, 12th February, 2008
The oil-producers’ cartel, OPEC, is actively considering delinking oil prices from the US dollar, and switching to the euro instead, according to the organisation’s Secretary General, Abdullah Al-Badri. Since 2000, several OPEC member states have seen their relative earnings decline because of the dollar’s slide, while imports have become more expensive, fuelling inflation. As Mr Al-Badri told the Middle East Economic Digest (MEED), ‘in oil exchanges in New York, Singapore or Dubai, you can see the currency is the euro or the yen.’ Although he thinks it could take a decade for the switch to the euro to be made, the signs are already there. Iran has already started pricing most of its oil in euros, and Venezuela has called for a study of the effect of the declining dollar on OPEC members’ economies.
As Mr Al-Badri commented, ‘it took two world wars and more than 50 years for the dollar to become the dominant currency. Now we are seeing another strong currency coming into the frame, which is the euro.’ Here in Egypt, where I am at present, the increase in importance of the euro has been remarkable over the past couple of years. But how many Britons have taken on board the fact that the currency derided by Euro-sceptics at its launch is now something which wecould actually be proud to be part of?
Jonathan Fryer 
James Schneider said
It’s entirely sensible to ditch the dollar for OPEC. However, this is worrying news simply due to the US response.
Abdul-Rahim said
The Euro in the UK may gain supporters from industrialists and economists who fear such a strong pound is one of the factors damaging industrial output and export.
Kevin Sweeney said
Necessity will drive the switch, and while America seeks to devalue its currency to effectively reduce deficits, this switch seems all the more necessary. The subject of multiple currencies is now on the table for discussion, so we could see a migration rather than a switch; the dollar simply being one of a number of currencies that can be used to buy oil.
If economic conditions deteriorate significantly further, like they appear to be doing, then there may OPEC may see an opportunity strike a serious blow to the US at a time when they’re not well placed to respond, unless they still have a trick up their sleeve.