7-18-2012 Petro China: Oil production has commenced at the Halfaya oil field in southern Iraq. Iraq Deputy Prime Minister said the consortium has started production of 100,000 barrels a day from the field, with some 16 billion barrels of oil in place. PetroChina, a subsidiary of China National Petroleum Corp., or CNPC, China's largest energy producer, holds 37.5% of the consortium. Total and Petronas Calgari each hold a 18.75% stake in the consortium, while Iraq's state partner holds the remaining 25%. Mr. Shahristani said Iraq's total output has reached around 3.1 million barrels a day, up from three million barrels a day last month. Iraq, a member of OPEC, holds the world's 3rd largest oil reserves and has become the second-largest oil exporter in OPEC after Iran, whose output is retreating following sanctions imposed by the European Union against Iran's oil exports. So far, PetroChina has invested some $700 million in Halfaya and the investment is expected to reach $1 billion by the end of this year. Some 22 new wells have been drilled in the field. Five wells existed before PetroChina started work on the project. CNPC and its subsidiary PetroChina are developing two more Iraqi fields. Along with BP PLC (BP, BP.LN), CNPC is developing Iraq's largest oil field, Rumaila, in southern Basra province, where production is hitting 1.35 million barrels a day. CNPC has invested $3.3 billion in developing oil projects in Iraq so far, the company's vice president said. http://www.foxbusiness.com/news/2012...-iraq-halfaya/
10 Reasons The Reign Of The Dollar As The World Reserve Currency Is About To End
March 26th, 2012 08:01 pm · Michael Snyder
The U.S. dollar has probably been the closest thing to a true global currency that the world has ever seen. For decades, the use of the U.S. dollar has been absolutely dominant in international trade. This has had tremendous benefits for the U.S. financial system and for U.S. consumers, and it has given the U.S. government tremendous power and influence around the globe.
Today, more than 60 percent of all foreign currency reserves in the world are in U.S. dollars. But there are big changes on the horizon. The mainstream media in the United States has been strangely silent about this, but some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade.
There are also some oil-producing nations which have begun selling oil in currencies other than the U.S. dollar, which is a major threat to the petrodollar system which has been in place for nearly four decades. And big international institutions such as the UN and the IMF have even been issuing official reports about the need to move away form the U.S. dollar and toward a new global reserve currency.
So the reign of the U.S. dollar as the world reserve currency is definitely being threatened, and the coming shift in international trade is going to have massive implications for the U.S. economy.
A lot of this is being fueled by China. China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016. In fact, one economist is even projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.
So China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet.
Over the past few years, China and other emerging powers such as Russia have been been quietly making agreements to move away from the U.S. dollar in international trade. The supremacy of the U.S. dollar is not nearly as solid as most Americans believe that it is.
As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world. Things are rapidly changing, and most Americans have no idea where these trends are taking us.
The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end….
#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade
A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other. This was an incredibly important agreement that was virtually totally ignored by the U.S. media. The following is from a BBC report about that agreement….
China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.
The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.
Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.
#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other
The BRICS continue to flex their muscles. A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar. The following is from a news source in India….
The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.
The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.
The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.
#3 The Russia/China Currency Agreement
Russia and China have been using their own national currencies when trading with each other for more than a year now. Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.
#4 The Growing Use Of Chinese Currency In Africa
Who do you think is Africa’s biggest trading partner?
It isn’t the United States.
In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.
A report from Africa’s largest bank, Standard Bank, recently stated the following….
“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”
China seems absolutely determined to change the way that international trade is done. At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.
#5 The China/United Arab Emirates Deal
China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.
The UAE is a fairly small player, but this is definitely a threat to the petrodollar system. What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?
Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade. For example, it has been reported that India will begin to use gold to buy oil from Iran.
Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.
#7 The China/Saudi Arabia Relationship
Who imports the most oil from Saudi Arabia?
It is not the United States.
Rather, it is China.
As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.
Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.
So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?
That is a very important question.
#8 The United Nations Has Been Pushing For A New World Reserve Currency
The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world.
In particular, one UN report envisions “a new global reserve system” in which the U.S. no longer has dominance….
“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency.”
#9 The IMF Has Been Pushing For A New World Reserve Currency
The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world.
In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published a while back actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….
“A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”
#10 Most Of The Rest Of The World Hates The United States
Global sentiment toward the United States has dramatically shifted, and this should not be underestimated.
Decades ago, we were one of the most loved nations on earth.
Now we are one of the most hated.
If you doubt this, just do some international traveling.
Even in Europe (where we are supposed to have friends), Americans are treated like dirt. Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.
If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar. But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.
So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end?
Well, some of the potential effects were described in a recent article by Michael Payne….
“The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives.”
Most Americans don’t realize how low the price of gasoline in the United States is compared to much of the rest of the world.
There are areas in Europe where they pay about twice what we do for gasoline. Yes, taxes have a lot to do with that, but the fact that the U.S. dollar is used for almost all oil transactions also plays a significant role.
Today, America consumes nearly a quarter of the world’s oil. Our entire economy is based upon our ability to cheaply transport goods and services over vast distances.
So what happens if the price of gasoline doubles or triples from where it is at now?
In addition, if the reign of the U.S. dollar as global reserve currency ends, the U.S. government is going to have a much harder time financing its debt.
Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade.
But what if that all changed?
What if the appetite for U.S. dollars and U.S. debt dried up dramatically?
That is something to think about.
At the moment, the global financial system is centered on the United States.
But that will not always be the case.
The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam.
Under the right conditions, a shift in momentum can become a landslide or an avalanche.
Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade.
Saudi Arabia And China Team Up To Build A Gigantic New Oil Refinery
March 23rd, 2012
Beginning of the end for the petro-dollar?
The Economic Collapse Friday, March 23, 2012
The largest oil exporter in the Middle East has teamed up with the second largest consumer of oil in the world (China) to build a gigantic new oil refinery and the mainstream media in the United States has barely even noticed it.
This mammoth new refinery is scheduled to be fully operational in the Red Sea port city of Yanbu by 2014. Over the past several years, China has sought to aggressively expand trade with Saudi Arabia, and China now actually imports more oil from Saudi Arabia than the United States does. In February, China imported1.39 million barrels of oil per day from Saudi Arabia. That was 39 percent higher than last February. So why is this important? Well, back in 1973 the United States and Saudi Arabia agreed that all oil sold by Saudi Arabia would be denominated in U.S. dollars. This petrodollar system was adopted by almost the entire world and it has had great benefits for the U.S. economy. But if China becomes Saudi Arabia’s most important trading partner, then why should Saudi Arabia continue to only sell oil in U.S. dollars? And if the petrodollar system collapses, what is that going to mean for the U.S. economy?
Those are very important questions, and they will be addressed later on in this article. First of all, let’s take a closer look at the agreement reached between Saudi Arabia and China recently.
The following is how the deal was described in a recent China Daily article….
In what Riyadh calls “the largest expansion by any oil company in the world”, Sinopec’s deal on Saturday with Saudi oil giant Aramco will allow a major oil refinery to become operational in the Red Sea port of Yanbu by 2014.
The $8.5 billion joint venture, which covers an area of about 5.2 million square meters, is already under construction. It will process 400,000 barrels of heavy crude oil per day. Aramco will hold a 62.5 percent stake in the plant while Sinopec will own the remaining 37.5 percent.
At a time when the U.S. is actually losing refining capacity, this is a stunning development.
Yet the U.S. press has been largely silent about this.
But China is not just doing deals with Saudi Arabia. China has also been striking deals with several other important oil producing nations. The following comes from a recent article by Gregg Laskoski….
China’s investment in oil infrastructure and refining capacity is unparalleled. And more importantly, it executes a consistent strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon subordinate U.S. relations with the same countries.
Egypt is building its largest refinery ever with investment from China.
Shortly after the partnership with Egypt was announced, China signed a $23 billion agreement with Nigeria to construct three gasoline refineries and a fuel complex in Nigeria.
Essentially, China is running circles around the United States when it comes to locking up strategic oil supplies worldwide.
And all of these developments could have tremendous implications for the future of the petrodollar system.
If you are not familiar with the petrodollar system, it really is not that complicated. Basically, almost all of the oil in the world is traded in U.S. dollars. The origin of the petrodollar system was detailed in a recent article by Jerry Robinson….
In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. In exchange for Saudi Arabia’s willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.
By 1975, all of the OPEC nations had agreed to price their own oil supplies exclusively in U.S. dollars in exchange for weapons and military protection.
This petrodollar system, or more simply known as an “oil for dollars” system, created an immediate artificial demand for U.S. dollars around the globe. And of course, as global oil demand increased, so did the demand for U.S. dollars.
Once you understand the petrodollar system, it becomes much easier to understand why our politicians treat Saudi leaders with kid gloves. The U.S. government does not want to see anything happen that would jeopardize the status quo.
A recent article by Marin Katusa described some more of the benefits that the petrodollar system has had for the U.S. economy….
The “petrodollar” system was a brilliant political and economic move. It forced the world’s oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world’s oil for free, since oil’s value is denominated in a currency that America controls and prints. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.
The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.
So what happens if the petrodollar system collapses?
Well, for one thing the value of the U.S. dollar would plummet big time.
U.S. consumers would suddenly find that all of those “cheap imported goods” would rise in price dramatically as would the price of gasoline.
If you think the price of gas is high now, you just wait until the petrodollar system collapses.
In addition, there would be much less of a demand for U.S. government debt since countries would not have so many excess U.S. dollars lying around.
So needless to say, the U.S. government really needs the petrodollar system to continue.
But in the end, it is Saudi Arabia that is holding the cards.
If Saudi Arabia chooses to sell oil in a currency other than the U.S. dollar, most of the rest of the oil producing countries in the Middle East would surely do the same rather quickly.
And we have already seen countries in other parts of the world start to move away from using the U.S. dollar in global trade.
For example, Russia and China have agreed to now use their own national currencies when trading with each other rather than the U.S. dollar.
That got virtually no attention in the U.S. media, but it really was a big deal when it was announced.
A recent article by Graham Summers summarized some of the other moves away from the U.S. dollar in international trade that we have seen recently….
Indeed, officials from China, India, Brazil, Russia, and South Africa (the latest addition to the BRIC acronym, now to be called BRICS) recently met in southern China to discuss expanding the use of their own currencies in foreign trade (yet another move away from the US Dollar).
China and Russia have removed the US Dollar from their trade China is rushing its trade agreement with Brazil China, Russia, Brazil, India, and now South Africa are moving to trade more in their own currencies (not the US Dollar) Saudi Arabia is moving to formalize trade with China and Russia Singapore is moving to trade yuan The trend here is obvious. The US Dollar’s reign as the world’s reserve currency is ending. The process will take time to unfold. But the Dollar will be finished as reserve currency within the next five years.
Yes, the days of the U.S. dollar being the primary reserve currency of the world are definitely numbered.
It will not happen overnight, but as the U.S. economy continues to get weaker it is inevitable that the rest of the world will continue to question why the U.S. dollar should automatically have such a dominant position in international trade.
Over the next few years, keep a close eye on Saudi Arabia.
When Saudi Arabia announces a move away from the petrodollar system, that will be a major trigger event for the global financial system and it will be a really, really bad sign for the U.S. economy.
The level of prosperity that we are enjoying today would not be possible without the petrodollar system. Once the petrodollar system collapses, a lot of our underlying economic vulnerabilities will be exposed and it will not be pretty.
Tough times are on the horizon. It is imperative that we all get informed and that we all get prepared.