OPEC could ditch dollars for euros

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Discussion Overview

The discussion revolves around the potential for OPEC to shift the pricing of oil from dollars to euros, exploring the implications of such a change on global economics and geopolitics. The conversation touches on historical context, economic calculations, and the influence of military presence on currency decisions.

Discussion Character

  • Debate/contested
  • Exploratory
  • Conceptual clarification

Main Points Raised

  • Some participants note that OPEC's secretary general suggested a possible switch to euros within a decade, highlighting the sensitivity of the dollar's status in oil pricing.
  • One participant proposes a mathematical approach to calculate the probability of OPEC abandoning the dollar based on its current value and potential future scenarios.
  • Another participant introduces a geopolitical perspective, suggesting that the U.S. would face economic consequences if OPEC switched to euros, emphasizing the role of U.S. military presence in influencing such decisions.
  • A participant references the historical context of the Iraqi war, implying that a shift to euros was a motivating factor for conflict, suggesting that similar motivations could influence current OPEC dynamics.
  • One participant expresses skepticism about the viability of Iran's euro-based oil bourse in light of these discussions.
  • A participant expresses a lack of surprise regarding the potential for OPEC to consider such a switch, indicating a belief that this outcome is anticipated.

Areas of Agreement / Disagreement

Participants express a range of views regarding the implications of OPEC potentially switching to euros, with no clear consensus on the likelihood or consequences of such a change. Several competing perspectives on the motivations and impacts of this potential shift remain unresolved.

Contextual Notes

The discussion includes various assumptions about economic calculations and geopolitical influences, which are not fully explored or agreed upon. The implications of military presence and historical context are presented as factors but lack detailed analysis.

EnumaElish
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OPEC could ditch dollars for euros

Fri Feb 8, 7:10 PM ET

LONDON (AFP) - OPEC could switch the pricing of oil from dollars into euros within a decade, secretary general Abdullah al-Badri told a weekly magazine.

...

MEED recalled that the pricing of oil in dollars is a sensitive topic. Saudi Arabia's Foreign Minister Prince Saud al-Faisal warned OPEC late last year that the dollar could plunge if OPEC publicly discussed abandoning it.

On Tuesday, Badri told reporters in London that several oil exporters were selling in dollars but buying other commodities in euros, calling the latter a strong currency.

The comments served to underline the difficulties currently facing oil exporting countries.
http://news.yahoo.com/s/afp/20080209/bs_afp/opeccommoditiesoilcurrency

If the dollar fell x% since Friday then the probability that OPEC will switch to euros can be calculated from:

current value of $ = $'s value (say) at noon on Friday * Prob{OPEC will not abandon $} + $'s value if OPEC abandons it * (1- Prob{OPEC will not abandon $}),

provided "$'s value if OPEC abandons it" can be assigned a quantity. E.g. if "$'s value if OPEC abandons it" = 0 (for demonstrative purposes) then:

Prob{OPEC will not abandon $} = (current value of $) / ($'s value at noon on Friday) = 1 - x.
 
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If OPEC switches to euros then the US has to pay for oil in real money instead of printing it so the probability can be calculated from :

1 - (number of US troops in your country propping up your regime + number of US troops next door ready to invade your country if you piss them off ).
 
One of the perceived reasons for the Iraqi war starting is because Saddam wanted to switch from Dollars to Euros. We couldn't let that happen, now could we?
 
So probably not looking good for Iran's Euro based oil bourse then?
 
Not a big surprise.
 

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