ROI-Trump's Venezuela oil grab revives 'petrodollar' debate: McGeever
The arrest and capture of Venezuelan president Nicolas Maduro by the United States on Saturday was likely motivated by many factors, but one that has been little discussed is the White House's concern about the declining global prominence of "petrodollar".
Venezuela's oil production is modest, at just 1 million barrels a day. However, its reported reserves are huge - around 300 billion barrels or 17% of global stocks.
Donald Trump has made it clear the U.S. wants to tap this huge potential. He plans to get U.S. energy companies?revitalize? the Latin American country's faltering oil industry.
Keep all future production in the U.S. orbit, but it could have a greater impact than just the energy markets. It would also create more petrodollars, a tool which has helped the U.S. to maintain its dominance over the global financial system.
The rise and fall of the Petrodollar
The term "petrodollar", coined by the U.S. in the 1970s, was created when Saudi Arabia and the U.S. agreed to denominate global oil sales in dollars. This agreement created a new demand for greenbacks and cemented the U.S.'s strategic, economic and political power.
Between 2002 and mid 2008, when oil prices almost reached $150 per barrel, the petrodollar was at its peak.
At the time, the U.S. had the largest crude importer in the world, which allowed oil-producing nations to accumulate huge trade surpluses. A large portion of this surplus was recycled into the massive U.S. Treasury Market. This put downward pressures on U.S. bond yields and interest rates, and thus, the global market.
In 2026, the world looks completely different. The shale revolution has made the U.S. the largest oil producer in the world and a net oil exporter since 2021.
Many oil-producing nations, such as Saudi Arabia, now use their trade surpluses to fill their own growing budget deficits.
The rise of China as an economic powerhouse and the emergence of new geopolitical divisions have also led to a reduction in the amount of global oil traded that is denominated by dollars. No official figures are available, but there is an estimate that up to 20% of global crude oil trade is priced in currencies other the dollar. Examples include the euro and the Chinese yuan.
The relationship between oil and the dollar has also changed.
JP Morgan analysts estimate that between 2005 and 2013, a 1% increase in the U.S. dollar trade-weighted reduced the price for Brent crude by approximately 3%. In the period 2014-2022, a rise of 1% in the dollar only reduced the price Brent crude by 0.2%. Last year, both the dollar and oil fell instead of moving in opposite directions.
It is evident that the petrodollar's power is declining, whether we look at the official Treasury holdings of oil producers or the oil revenues as a percentage of global capital flows.
TRUMP PUSHES BACKWARD
The dollar has been steadily losing its global standing over the last few decades. The dollar's share in foreign currency reserves has fallen to its lowest level in 25 years. While it still remains the dominant currency for global trade, this position is also beginning to wane.
Trump's administration, however, is pushing back. The White House wants the dollar exchange rate to drop, but it also wants to maintain its dominance on global markets. Recent events in Venezuela may be part of that effort.
Washington seemed to have little appetite to fight the geopolitically-driven global trend of diversification away the dollar until Trump returned to the White House a year or so ago.
Trump's administration has taken an even stronger position. It is pushing for dollar-pegged stablecoins to boost the dollar's position in global finance and digital payments. It has also threatened imposing tariffs on nations that are seeking alternatives to the US dollar. This includes the BRICS group.
This effort could include gaining control of the world's largest oil reserves, particularly since it would involve muscling China and Russia out of the picture - allies of the Maduro regime.
Hung Tran is a nonresident senior fellow with the Atlantic Council. He says that the dollar "is still the main currency on the oil market and the U.S. tries to preserve this."
Richard Werner is a professor of banking, economics and finance at the University of Winchester. He agrees that Washington’s actions in Venezuela likely aim to bolster the petrodollar-based system.
He believes that these extreme measures could be interpreted as "desperation", which could lead to the rapid decline of the petrodollar, should the BRICS countries and other nations in the "Global South", balk at Washington's military force used to maintain currency dominance.
It remains to be determined.
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(source: Reuters)
