Rapid Fire
Petrodollar System
- 12 Jan 2026
- 3 min read
The US capture of Venezuelan President Nicolás Maduro has renewed attention on the declining influence of the petrodollar amid changing global oil trade dynamics.
- Venezuela holds the world’s largest proven oil reserves (~300 billion barrels, ~17% of global stock) but produces only about 1 million barrels per day, leaving vast untapped potential.
- The Trump administration aims to revive Venezuela’s oil industry by involving US energy majors, potentially re-anchoring future oil production within the US economic orbit.
- Petrodollar System: The petrodollar system refers to the global arrangement under which international crude oil trade is predominantly priced and settled in US dollars, creating sustained global demand for the dollar and reinforcing US economic, financial, and geopolitical dominance.
- It emerged in the mid-1970s following the collapse of the Bretton Woods system.
- Peak of Petrodollar Influence: Between 2002 and 2008, high oil prices and US dependence on crude imports enabled oil-exporting countries to recycle large surpluses into US Treasury markets, which suppressed US bond yields and contributed to lower global interest rates.
- Post-shale Structural Shift: Following the shale oil revolution, the US became the world’s largest oil producer and a net oil exporter since 2021, significantly altering traditional petrodollar dynamics.
- Changing Oil Revenue Usage: Oil-producing countries like Saudi Arabia are increasingly using their oil revenues to finance domestic budget deficits rather than investing heavily in US financial assets, weakening earlier capital flow patterns.
- De-dollarisation Trend: An estimated around 20% of global crude trade is now priced in non-dollar currencies such as the euro and Chinese yuan, reflecting reduced dollar dominance in oil trade.
- The historical inverse relationship between the dollar and oil prices has weakened sharply, indicating declining financial leverage of the petrodollar system.
| Read more: US Intervention in Venezuela and the Revival of the Monroe Doctrine |
