Implications of OPEC trading in Euros

Discussion in 'Business & Economics' started by hypewaders, Apr 10, 2004.

  1. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    William Clark has long postulated that the invasion of Iraq had much to do with a perceived threat in Washington regarding petroleum trading. Being weak in economics, I'm appealing for an education in how a currency change in OPEC would affect the US. Is this another wild conspiracy theory, or is an OPEC switch to the Euro a likely and serious economic shakeup?
     
  2. Google AdSense Guest Advertisement



    to hide all adverts.
  3. Undecided Banned Banned

    Messages:
    4,731
    It's a big deal for the US, very big deal indeed. If oil were being traded in Euros today, the prices of oil in the US would be astronomical. Since the US dollar is the standard currency (for now) price fluxuations are done with the US $. If it were done in Euros the US would lose the competitive advantage, and easily the international currency of choice would be the Euro. A even bigger worry for the US would be the anticipated Pan-Islamic currency that is currently being touted by Malaysia.
     
  4. Google AdSense Guest Advertisement



    to hide all adverts.
  5. ChildOfTheMind So dark the con of man Registered Senior Member

    Messages:
    337
    Ya... I concur, but basically I think the same, but kinda different
     
  6. Google AdSense Guest Advertisement



    to hide all adverts.
  7. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    Coming back from time to time, I'm hoping that someone will address this, or critique it from an economics standpoint. From originally referenced link for this thread:

    -William Clark Revisited - The Real Reasons for the Upcoming War With Iraq:
    A Macroeconomic and Geostrategic Analysis of the Unspoken Truth


    I would like to hear a credible refutation of these arguments. I'm also morbidly curious about what compounding failure in the Dollarization of world currencies would mean for American lifestyles.
     
  8. vodooeconomist Registered Member

    Messages:
    23
    *gets in Economics major mode* Ok, I'll try and explain this stuff in layman's terms.

    Two reasons Bush has gone to war in Iraq.

    A) Preserve value of foriegn held US $. Since the dollar is so stable, lots of countries hold dollars in their reserves (in the form of cash money and bonds). And its stable because of high investor confidence in the stability of the dollar and the US. One reason (but not the only one) for this is that OPEC trades in dollars, making price fluctuations easy to compare. But if OPEC switched to Euros, countries would flush dollars from their reserves and replace them with Euros. Like the stock market, this massive sell-off of dollars would flood the market, causing its value to drop. And that would lead to economic havoc in the US (and eventually the world's) economy, unparalleled since the Great Depression.

    B) Peak oil. Basically, the peak oil argument says that oil production exists on a bell curve. On the up-slope, oil is plentiful and easy to get at (and therefore cheap). But on the downslope, oil is hard to get at (with our current tech) and ergo expensive. The Peak Oil model is very pessimistic, and it says that we are already on the downslope, and that world oil supplies (that we can get at) will be exhausted as early as 2010. In theory, the Bushiosi control Iraq with a "government" that will sell oil cheaply to the US while the rest of the world experiences high oil/gas prices and general economic havoc. Personally, I am waiting to see more definitive evidence that would point either way on the topic.
    See http://www.lifeaftertheoilcrash.net/Introduction.html

    I am fairly sure about what I said about peak oil, but not as sure about the first part. I've only had intro Macro and Microeconomics... Intermediatemicro this fall!
     
  9. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    This is a subject that a lot of people seem uncomfortable considering. With the EU already a larger economy than that of the US, it seems inevitable that Petroeuros are coming, and will apply a squeeze if not a crushing force upon the Dollar.

    Peak Oil also seems to be a somewhat repressed subject, as if too depressing for many of us to consider seriously. I'm still learning, and haven't formed a clear opinion about Peak Oil. Thanks for the response, VE.
     
  10. vodooeconomist Registered Member

    Messages:
    23
    Funny thing happened to me today regarding the book "The Hidden Hand of American Hegemony: Petrodollar recycling and International Markets". I went out to Barnes and Noble to see if they had it in stock, and the woman at the info desk gave me a blank stare as she typed it into the search computer... And then stared at me again when it popped up as an actual book. I love being an Economics major

    Please Register or Log in to view the hidden image!

    .
     
  11. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    From what I have learned about the accepted model of Peak Oil, and that you have written, voodooEconomist, the Peak occurs around 2010 and is not depletion. The Peak Oil model doesn't speak of total depletion, or even refutes total depletion: Instead, it is postulated that there will always be billions of barrels of oil deep below us, being that it is a fundamental component of Earth's matter, but after 2010 the tide of fortune turns against the petroleum business because it becomes too expensive to bring to market at an acceptable price: Demand also surpasses supply from 2010 onward, also sending prices steeply higher, until at some not too distant point, the oil economy suddenly implodes without a replacement.

    Critics of peak oil seem to be anticipating the miraculous invention of antigravity will suck oil up straws that are miles long, or a magical free energy that will squeeze oil out of shale, or a Derrick in Every Back Yard, would-be uppity Sheikhs in every detention camp, and a massive military empire that will make sure Americans get the Last Heapin' Helpin'. But that's all utter bullshit- widely accepted here in the USA- but nevertheless bullshit.

    Combining this understanding of Peak Oil (and please refute it if you can), with PetroEuro conversion (also, refute it if you can), with Petrodollars as a primary underpinning to the US economy (an agreed given, I think), with general American govt and corporations increasingly unpopular globally (obviously), and with unprecedented national and personal debt in the US (ditto), it looks like the most reliable recipe for Trouble (with a very large capital "T") we have ever faced: Worse than 1929 Trouble.

    I would like to hear from an economist, or budding economist, who can contribute to considerations I am seriously making, about getting my family's affairs in sufficient order to move away from the US if necessary and get a career established elsewhere, where a hydrogen economy can be expected to come online as or most quickly after the old economy crashes, because America's oil barons are going to run their country right over a cliff on the present course. I would prefer to make a move before a wave of American emmigrants becomes visibly imminent to everyone.

    So come all you economists, and either allay my fears, or help motivate my escape.
     
  12. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    OK now we have oil at $55 and climbing, months after the Saudis reassured America that they would boost output to hold the line for us, "No problem, my friend". But they haven't. While US is reassuring its public to relax, they're in good hands- while the Strategic Petroleum Reserve is being frantically added to like never before. Meanwhile OPEC is under unprecedented political and economic strain. If OPEC goes out like ENRON soon, we could witness the triggering of a series of mutually-resonant distribution interruptions. I am worried that in terms of Dollar-per-Barrel (more) and Euros-per-Barrel (less) there could soon come the implications of which I write. Yes? No? Maybe? So:
     
  13. guthrie paradox generator Registered Senior Member

    Messages:
    4,089
    If your looking for places to move to, I would recommend thinking about various points.
    Such as:
    1) what alternative sources of energy are there that could produce H2?
    2) is there sufficient farming capability to feed itself?
    3) Is it not too overburdened with natural resources, for being so tends to encourage an extractive economy and you end up like large parts of South American and Africa.
    4) can you speak the language and like the culture?
    Scotland would be a great place if I could be in charge of it for a few years.

    There is of course the other point that so many dollars are held as loans that if they get called in the dollar goes by by and so does the world economy. A slightly different slant on it all:
    http://www.commondreams.org/views04/1022-26.htm

    Of course, seeing as economics is a form of magic and religion, it needent occur like the worst predictions, but then its unlikely to be as well as the good predictions say.
    Ultimately you might be better off just moving to rural small town USA, and getting a smallholding. Then you can grow your own food and firewood and do other jobs to eke out a living.
     
  14. kmguru Staff Member

    Messages:
    11,757
    A few comments (coming late to the thread):

    My next door neighbor just drilled his land for oil and now, they are setting up a pumping station. Which says there will be oil for sometime to come. So, if something happens, I am going to extend a hose from our yard to theirs!

    Please Register or Log in to view the hidden image!



    We need to get serious about solar cells. That can free up a lot of oil for other use. Let the Chinese manufacture them, an we can import them cheap - that is better than importing all the toys.

    Hydrogen from Borax is a viable solution for alternate energy. I suggest, all the public transportation use Hydrogen. The government can afford the initial investment.

    Improve the nuclear energy technology. With a pallet based design and with new heat exchanger fluids with a double exchanger design, it can be made safe for a while.

    Create a national or international prize for the first nuclear fusion engine....scrap all the outbound NASA space program to concentrate on fusion research....I bet you we could have one in 10 years.
     
  15. te jen Registered Senior Member

    Messages:
    532
    You want a defense plan? Tell Lockheed Martin and General Dynamics and Consolidated Kill-bots that they are no longer in the weapons business, but in the energy business. They could really give a shit what they build so long as the money keeps flowing. Let the oil barons get their hooks in it, too - I'm willing to maintain an economic status quo in exchange for stability in energy production through alternative pathways. Stick the $500 billion annual defense budget into that project and see what kind of profits that generates - exportable technologies, full employment for your armed forces moving and assembling all that hardware, plus the salutary effects of ripping out and replacing all that carbon-based energy infrastructure. Bonuses include telling the Saudi royal family to go to hell and reversing the trade imbalance with China in less than ten years. Nobody even has to lose their toys - you just tell people that they have fifteen years to use up their gasoline-powered cars and then they have to switch. I'll bet you could even convert your '57 Chevy to run on hydrogen - it wouldn't be efficient but I think it could be done....
     
  16. wkirby Registered Member

    Messages:
    29
    Okay, i'm joining this conversation rather late - but i'll catch up quickly:

    First I think that many of our fears with the EURO are somewhat unnecessary. Most of it is fueled because of the short term weak nature of the dollar. Don't forget that it was not too long ago that the dollar was probably too strong for our good! Our dollar isn't weak today becasuse the EURO, it's because of multiple factors that are cyclical and our economy will fix naturally. If you want me to elaborate, I can.

    With a weak dollar you're finding people switching their short term holdings to the EURO, which is catching a European economy that is on a slight rebound from just a few years ago (remember when the Dollar was strong and Europe was struggling?). That's causing a lot of hysteria regarding what other groups will switch to the EURO.

    Now lets look at OPEC and the possibility they would switch to a Euro based system. This would mean that they would prefer a newly made currency based on economies with history of poor monetary management, political unrest, failed and low-growth economies over a tried and rather true Dollar that has been shown to be properly managed with an economy that can support that management and grow out of shocks to it? It just doesn't make sense to me when so much of what OPEC does is price controls. They want to know exactly what they're dealing with. Sure it could happen, but I tend to think that we'll have decreased a dependency upon oil before that's ever a feasable issue.

    That's all kind of confusing and certainly poorly written, but I think you all get where i'm going with it.

    As far as oil itself goes - we'll develop out of our dependency. Sure we've been slow doing it, but that's because there's truly no need to be expedient about it. Believe me, as the price of oil rises the market will begin to find alternatives. Just watch the auto market evolve with hybrids over the next 5-10 years. It's just a start to the long run goal.

    -Will
     
  17. wkirby Registered Member

    Messages:
    29
    I promise you that in down the road when you're much older you'll laugh when you read that. Alarmist and doomsday believers will lead you down a path of fear that has some rational reasoniong but carries it to the depths of lunacy. I suggest that everyone here pick up an economic history book - a good one, maybe even a textbook and just read how the problems we are dealing with today are so similar to problems of the past. The market works friends, just put it into perspective.

    Voodoo - I see you're getting started down the economics path - good luck and trust me, it gets more interesting. Have you studied anything about the Jeffersonian economy?

    -Will
     
  18. Shifty Russian International Man of Mystery Registered Senior Member

    Messages:
    78
    Hey,

    Joining the thread pretty late (how the hell I didn't see there was an economic section earlier, I don't know). A quick bit on the petro-dollars doing a Copperfield and turning themselves in to petro-euros. The effects would be quite nasty - I don't know if it would hit the dollar by 40% - but a 20% hit - would be very likely... How ever the change is sometime away - especially with Bush in Iraq. Given the potential dire results of change such making the PD's -> PE's from a global economic perspective... It's likely that this change would be held off for quite a while.

     
  19. DubStyle I may be wrong, but I doubt it Registered Senior Member

    Messages:
    214
    if you dont mind, man, please do

    if you go by the majority of whats posted on this site you would think the EU is going to own the US in every aspects of everthing "very soon"

    id like to hear somone debunk that
     
  20. Undecided Banned Banned

    Messages:
    4,731
    No that's China's job...
     
  21. kmguru Staff Member

    Messages:
    11,757
    OPEC will not switch to Euro simply because Saudi Arabia Royal Family is married to the Dollar. But EU could be bigger in Economy than USA on the GDP basis depending on how many countries join it. So what. Soon China and India will be up there too. Technically NAFTA could put North American block the same way - if Mexico can get their act together...
     
  22. Undecided Banned Banned

    Messages:
    4,731
    I don't know if the dollar sinks way too low these countries especially malthusian Saudi Arabia may not be able to sustain the dollar.
     
  23. hypewaders Save Changes Registered Senior Member

    Messages:
    12,061
    If the recent Dubai Ports hubbub in the USA were to trigger a significant Arab divestment from the US economy, it will also hasten a conversion from petroDollars. Concurrently we have an antagonized Iran proposing their oil exchange Euros. Are American policymakers trying to hasten the end of the US Dollar's reign, or are they just inept?
     

Share This Page