Petrocurrency
From Wikipedia, the free encyclopedia
Petrocurrency is a portmanteau neologism used with three distinct meanings, though often confused:
- Trading surpluses of oil producing nations, originally called petrodollars
- Currencies of oil producing nations which tend to rise in value against other currencies when the price of oil rises (and fall when it falls).
- Currencies used to price the oil in the international market.
In general petrocurrency describes the money in dollars received by a country that exports oil. The US dollar is the only petrocurrency due the fact that the OPEC and other oil producing countries use it to denominate the price of oil.
The Pound sterling is sometimes regarded as petrocurrency thanks to North Sea oil exports. The Australian dollar does not fall in this category, since Australia does not export a significant amount of oil every year.
The Canadian dollar is increasingly viewed as a petrocurrency. As the price of oil rises, oil-related export revenues rise, and thus constitute a larger component of Canadian exports. Thus, the movements of the Canadian dollar have become increasingly correlated with price of oil. For example, the exchange rate of Canadian dollars for Japanese Yen (99% of Japan's oil is imported) is 85% correlated with crude prices.
A condition for a currency to become a petrocurrency is its long term stability. Long term stability can only be guaranteed by the volume of reserves the country of the currency has as well as by high oil prices. It is estimated that Saudi Arabia, Venezuela, Iran have oil reserves for the next 200 years, which make their currency favorite candidates for petrocurrencies.
Countries whose currencies could become petrocurrencies due to the volumes of petroleum they export and the volume of their oil reserves :
[edit] See also
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