Petrocurrency

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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.

1 Currencies correlated with oil prices
2 Currencies used to trade oil
3 Referencies
4 See also

[edit] Currencies correlated with oil prices

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.

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.

[edit] Currencies used to trade oil

Since the agreements of 1971 and 1973, OPEC oil is exclusively quoted in US dollars. This created a permanent demand for dollars on the international exchange markets.^[4] As of 2005, OPEC continues to trade in petrodollars, but some OPEC members (such as Iran and Venezuela) have been pushing for a switch to the euro.

Since the beginning of 2003, Iran has required euro in payment of exports toward Asia and Europe, though prices are still expressed in US dollars [1]. Iran is planning to open an International Oil Bourse (IOB, exchange), on the free trade zone on the island of Kish ^[2], for the express purpose of trading oil priced in other currencies, including euro.

On May 10, 2006 Russian president Vladimir Putin announced the project for the creation of an Oil Exchange denominated in rubles to trade oil and gas. The purpose of trading in rubles is to convert it into an international currency which would also be used to pay other commodities and goods. The Oil Exchange would operate from 2007 and will give rise to the petroruble as those countries that buy oil and gas from Russia will have to acquire them and use it as reserve.^[1]^[2]^[3]^[4]