What is the significance of selling oil in euros v. dollars?

[funflower]

I don't understand why Saddam's switch from dollars to euros upset the Bushies so much. Can someone enlighten me?

[Old and In the Way]

1. I think the USD = around 1.25+ Euro's

If the selling price is in Euro's, we'd be spending 25% more for the oil.

[lostnfound]

2. The fact that oil is tied to dollar helps hold up the value of the dollar

We have these huge twin deficits -- trade and budget. In most countries this would result in steep inflation and potentially the collapse of the currency. But the US has 2 big saving graces: 1) Japan & China continue to invest big bucks in the US, particularly buying government bonds and 2) oil is sold in dollars, so there's a demand for dollars in order to buy oil.

[madrchsod]

3. 3.00 dollar gas prices...

euro`s are now at about 1.20 to the dollar...saddam and chavez wanted to switch when the euro` were 80c....40c difference. not a bad deal is it?

[norml]

4. If Euros replaced Dollars as the currency used to buy oil...

all the countries that now buy and hold dollars in order to be able to buy oil on the world market would have to dump their dollars for Euros.

[firefox]

5. The dollar is the world's reserve currency

The US is great at printing money. You very seldom see how much currency is added and how much is oversees. But for the last 10 years we have printed bunches of money and as long as the world holds it as its reserve currency things are fine. It is when the dollar comes home to roost that scares everyone. What happens when they hold the Euro and start buying American companies and assets with the currency in foreign hands.

Trading money for oil and natural resources is great for business. The event that will mark the end of the superpower era for the US will be the dumping of the dollar as the reserve currency.

Doesn't the Federal Reserve make interest on all those bills out there. Are they not the ones that introduce cash into the system?

[CHIMO]

6. Just Imagine

That in all your purchases that you had to pay in cash. Now just imagine that the cash were to be widgets. So one would have to keep a bunch of widgets around to buy food, gas etc, etc..

Now the entity that makes widgets would find that everyone wanted widgets, all of a sudden. So they would produce a few more widgets but also the value of the widgets would increase as everyone needs widgets. At the same time those widgets have displaced the funny colored paper that they don't require. So everyone is lining up to exchange them for widgets.

Thus the one that controls the production of widgets controls the value of the widget. And as everyone wants widgets that is fine for everyone. Not so fine for the manufacturer of colored pieces of paper though.

My interpretation of the case.

[wli]

7. large dollar reserves are needed to pay for oil, inflating its value

The dollar would be something on the order of the Mexican peso otherwise.

[gumby]

8. When your "dollars" mean nothing

in acquiring the world's most important commodity, where are all the people who trade in "dollars"?

Clue: they are left on the short end of the stick. Hence, we spend all our national fortune in a quagmire. Same result.

This is what happens in a Nation without vision that continually depends upon extraction and exploitation as its foundation.