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Originally Posted by Moth
I reckon that is about the stupidest analysis I have read here in a while.
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Someone who couldn't grasp the concepts would probably make an observation like that.
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Originally Posted by Moth
You and others need to grasp some basics of the Oil Industry.
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I already know the basics.
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Originally Posted by Moth
It is OPEC who uses the Dollar as their currency. Why?
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Because the US government guarantees the ruling clans will remain in power by protecting them.
There are no free and fair elections in Saudi Arabia. There is no freedom of speech or freedom of the press. The government will shut down any privately owned TV or radio station, or any newspaper or publisher who criticizes the Saudi government.
The Saudis can do that because US intelligence set up and trained the secret police apparatus, which imprisons, tortures and murders dissenters.
Jordan has no oil, yet one-sixth of Jordan's GDP is US foreign aid money. Why? Because Jordan is in the Middle East and borders Saudi Arabia and it is necessary to maintain the government in Jordan lest other countries get the idea that they can overthrow their governments.
The US backed puppet was King Abdullah until he died, and now the US backs his son, King Abdullah II.
What did he do? Dissolved parliament and started issuing decrees. What a great dictator. Here's a man who's in a military officer uniform on Monday, wearing an Italian business suit on Tuesday, decked out in grunge clothing drinking cappuccino in a cafe on Thursday, and running around dressed like a pious sheik on Friday.
It's no secret that there are 34 so-called Muslim countries, but only 16 of them are democracies. Which 16? The 16 that do not have an oil-based economy or a single cash-crop economy.
I guess making the connection is beyond your faculties.
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Originally Posted by Moth
Well, OPEC is a cartel which means its a group of producers that see to limit the supply of oil so as to control the global price of oil. So pricing it in one currency is essential to having one price as you avoid flux due to currency risk and swings.
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Cartels do not inherently engage in price-fixing.
Your claim that OPEC limits production to drive prices up fails.
Not only does OPEC out-produce non-OPEC countries, but OPEC oil sells for less than non-OPEC oil, something I have repeatedly proven over and over and over on this forum by showing sale prices posted on the EIA web-site.
For example, Canadian Hardisty, which is an heavy oil always sells for $6 to $12 more than Iran Heavy or Arab Heavy or Venezuelan Boscan.
March 11 of 2011 and Canadian Hardisty was selling for $85/barrel versus Iran Heavy at $68/barrel.
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Originally Posted by Moth
OPEC is made up of many countries from different regions: Saudi Arabia, Indonesia, Nigeria, Venezuela, etc. Different countries, different currencies. They need a unified one so the use the Dollar.
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Indonesia left OPEC several years ago.
Looks like you need to grasp some basics of the oil industry.
OPEC did not need a unified currency. They could have sold their oil on the world market in French Francs, Swiss Francs, German Marks, British Pounds, the Australian or Canadian Dollars, gold, or US Dollars.
All of those were stable currencies. OPEC could also sell its oil in Euros, which has greater value than the US Dollar.
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Originally Posted by Moth
Why the Dollar? Well, why not? The Dollar is the world's reserve currency.
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And why is that?
That is because of the Bretton Woods Agreement.
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Originally Posted by Moth
Would OPEC switching to another currency hurt us? No.
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Yes.
The value of any currency is based on Supply & Demand and also on confidence in the currency, the government that backs the currency and the economy on which the currency is based.
That is Economics 102.
Norway has a stable government, a stable economy, and Norwegians and many others have confidence in the Norwegian Kroner as a currency, yet the US Dollar has greater value than the Norwegian Kroner.
At present, 5.75 Kroners equals $1.
Why?
Because there is no great demand worldwide for Norwegian Kroners.
The US Dollar was much stronger against the French Franc, German Mark and other European currencies, until those countries banded together under a unified currency, the Euro.
The Euro is stronger than the US Dollar because there is greater demand for the Euro than the US Dollar.
Currently, you need $1.33 to buy 1 Euro.
And why? Because Russia dumped 100% of its US Dollar reserves and only trades in Euros and Rubles. If you want to buy oil from Russia, then leave your US Dollars at home, because the Russians don't want them.
So long as Russia sells 9.1 Million barrels of oil per day on the world market in Euros and Rubles, the US Dollar will never be stronger than the Euro.
If OPEC countries start selling their oil in basket currencies, then that reduces worldwide demand for the US Dollar and weakens the US Dollar against the Euro and Ruble and all other currencies.
In about 6-9 years when Russia finishes the 5 Million barrel per day pipelines to Stachi and Norossoiysk on the Black Sea, and that Central Asian oil is being sold in Rubles and Euros, you'll see the US Dollar decline permanently about 0.5 to 0.8 against the Euro.
Debunking...
Mircea