Iran dumps US dollar for oil trades

Iran, OPEC's second-largest producer, has stopped conducting oil transactions in U.S. dollars, a top Oil Ministry official said Wednesday [30 Apr 2008]. Iran has dramatically reduced dependence on the dollar over the past year in the face of increasing U.S. pressure on its financial system and the fall in the value of the American currency.

Oil is priced in dollars on the world market, and the currency's depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves. Iranian President Mahmoud Ahmadinejad called the depreciating dollar a "worthless piece of paper" at a rare summit last year in Saudi Arabia attended by state leaders from OPEC countries.

- The Iranians are not at all alone in this important emerging trend. Venezuela has recently opted for oil contracts in euros, and Russia has been quietly preparing to switch some oil trading to rubles.

This looks like the beginning of the end of US dollar dominance in the global oil markets, something that many in the peakoiler community have spotted well in advance. But oil trading in USD will not completely disappear any time soon, while the Saudi's who after all still own the world's largest oil field, remain staunch US allies.

Perhaps in time we will see community members start putting up pie charts depicting the breakdown in terms of millions of barrels of oil production per day versus the currencies in which they are traded, and the chart taken in its entirety will start to look somewhat like a basket of currencies.

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