Petrodollar: UBS Explains the Future of the US Dollar

“Petrodollar” has become a prominent term in the financial world as the 50-year agreement with Saudi Arabia has concluded. This change allows the Kingdom of Saudi Arabia to accept local currencies from other countries for oil transactions. However, this process has a significant flaw: Saudi Arabia announced its readiness to accept local currencies two years ago.

This is not a new development, as several countries have already paid in their local currencies for oil, bypassing the US dollar despite the petrodollar agreement being in place. So, will Saudi Arabia stop accepting the US dollar for oil now that the petrodollar agreement has ended? The answer is no. The US dollar’s dominance in oil trade remains strong, and Saudi Arabia will continue to accept it for the majority of transactions, even though the petrodollar agreement has ended.