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Petrocurrency (also known as petrodollars) is popular as shorthand for revenues from petroleum exports. During the period of expensive oil, a new currency was introduced to pay the price. The classic example of a petrocurrency traded in the forex market is the Canadian dollar (since its value often rises and falls along with the amount of oil due to Canada's considerable oil reserves). The U.S. Dollar is the primary currency used to price oil within the international Petroleum market.

The value of the currency rises and falls along with the price of the oil. The market determines the exchange rate of the Canadian dollar against the primary currency. Macroeconomics plays a significant role in determining the value of oil.  Keep reading to know all about petrocurrency.

What is Petrocurrency?

Petrocurrency is also known as the petrodollar. It is similar to any U.S dollars but is only used to pay for oil imports and exports. All international transactions are priced in dollars (since it is a global currency). With the inception of the concept of petrocurrency, the oil-exporting nations have begun to receive dollars. It makes the national income dependent on the value of dollars. If the value of the dollar falls, so does the government’s revenue.

The system of petrodollar originated at the Bretton Woods Conference in 1944. It was the time when the United States held most of the world’s supply of gold. The pact stated that US dollars could be redeemed at the value of gold. Later, when the oil expenses were very high (in the early 1970s), the world witnessed the first petrodollar surge. Since then, the petrodollar is used to pay for the import and export of oil.

Later, it was found that the United States uses the power of petrodollars to enforce its foreign policy. The petrodollar is dominating the whole world and has become the world’s reverse currency. It has also become one of the most important sources of liquidity. Moreover, foreign capital inflows through petrodollar recycling that aids in the profit of financial markets. Petrodollar faced mounting inflation during the Vietnam War debts. It has gone through many vicissitudes throughout history. It compelled President Nixon to cancel the fixed-rate convertibility from US dollars to gold.

The petrocurrency rate varies with changes in the market conditions. Starting from inflation to stock market census, there is no fixed rate of petrocurrency. However, recent statistics showed that petrodollar price is $0.020004 USD and the ROI is 6,171.65%.

Which Currencies are Used as Petrocurrency?

From the inception of the concept of petrocurrency, the dollar was used to pay for the import and export of oil. The pound was used to pay as petrodollars in the North Sea oil exports. At the time of World War II, Dutch Guilder was also used as a petrocurrency. After OPEC began a series of price hikes in oil import and exports, Dutch Guilder was the only currency that was used as petrocurrency.

At the beginning of the 21st Century, Canadian Dollars were increasingly used as petrocurrency. As long as oil export remained an active component of Canada’s export economy, Canadian dollars were the only mode of petrocurrency. Later, in the middle of the 21st century, US dollars took over. US currency was always a significant currency for trading oil.

According to the recent development in August 2018, Venezuela joined the group of countries that allowed their oil to be purchased. The country uses Euros and Yuan as petrocurrency.

How Petrocurrency Works?

Petrocurrency works in three different ways across the globe. Here is a brief insight:

• Dollars paid to oil producing nations (Petrodollar or Petrodollar recycling): A term invented in the 1970s meaning trading surpluses of oil-producing countries.
• Pricing of oil in US Dollars: Currencies used as a unit of account to price oil in the international market.
• The association of different countries that pay in petrodollars: This association includes members to improve and enhance the process of oil import and export.

Petrocurrency is the best way to trade with the USA and other countries of the world. According to many economists, petrocurrency and the market of oil import and export will never hit a low.

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