SeaGypsy wrote:Which would require just on it's own, massive volume increase, huge improvement in stability of the floating Euro, a serious float of the Yuan, etc. None of which is going to happen overnight.
americandream wrote:Most unlikely. The necessary trust is not there.
What I am trying to say, I guess, is that being the global reserve currency and a "petro"-currency does not have to be the same thing. We may finish up in a situation where some oil is traded in currencies other than the global reserve one, or where there is no global reserve currency at all.
At the moment, the oil pricing is defined at the oil futures market, which is much greater than that of the physical oil in terms of value, and which is financial/speculative. 80% of this market is reportedly controlled by only two investment banks. There is nothing to suggest that this situation is objectively pre-defined by the laws of economics and as such is inherently stable. Moreover, there are signs that it may be not too long before this situations seriously changes, or at least suffer some disruptions. What kind of repercussions this may entail for the suppliers/customers in the real oil market, one may only guess.
From the point of view of a mono-cultural oil supplier (i.e. producing nothing of significance but oil), for example, the key is his ability to trade his oil for as extensive as possible variety of goods, starting from the vital commodities (foodstuff), to the most technologically advanced gizmos. There are only three regions on the planet that are capable of delivering in this sense in an independent manner - USA, EU and China. USA is the apparent leader - for example, manufacturing alone in the "de-industrialised" USA is greater than the entire GDP of "the industrial powerhouse" Germany, and accordingly, the US dollar is a preferred choice, in general. But the fact that the commodity markets are now primarily based on financial speculation may play havoc on the US, in case these markets are somehow destabilized. For example, in the event of some internal political in-fighting in the US or large-scale upheaval there.
Again, from the point of view of an oil supplier's head of state, it is not important, whether the related financial markets are big enough, or whether the volumes are sufficient or floats are in place etc.; at least this is not the first consideration. The primary consideration is how he is going to feed his populace and deliver iGadgets to the rich, to ensure the basic stability in his country. The level of sophistication of the related financial markets will not matter for him at all as far as these objectives are concerned. Therefore in case of some clinical insanity in the US, he will be looking primarily on who is his main customer is - in case of the EU, he will be able to trade in euros, in case of China - in yuan.
Moreover, some developments in this direction have already taken place. Iran traded its oil in other currencies/"gold" for a while, and China has been introducing swaps with the major commodity suppliers.