Petrostates Need Captive Oil Customers

[Joe Leote]

This video provides a plausible explanation for how oil prices are set by strategic petrostate policies with consideration for the needs of captive customers:

Why Oil Will Never Hit $200

Historically the giant oil companies, known as The Seven Sisters, may have had less collective and individual pricing power, compared to the emerging Petrostates that nationalized oil industries.

Joe

[Joe Leote]

The video makes it seem like synthetic rubber displaced natural rubber. To break the monopoly pricing power of those in control of the production of natural rubber there was a political-economic incentive to develop synthetic rubber. However, other sources claim the world is experiencing high demand and short supply of natural rubber in 2026. This is because natural rubber is still relatively difficult to produce at scale yet superior to synthetic rubber in specific high demand applications.

Joe 

[William Meyer]

Have read from Brad setser that he doesn't believe petrodollars are too important anymore? - I imagine with oil prices being subdued for some time now (until recently) has left their fx reserve flat perhaps? He thinks petrodollar system has changed into more of an asian dollar system.  

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[Joe Leote]

As I recall FDR met with the King of Saudi Arabia on a military ship in 1945. I don't recall the significance of the meeting, but it built stronger political-economic ties between the two nations. This video describes the history of the Petrodollar concluding the commonly told story to be a myth:

The PetroDollar is a myth. The Iran war confirmed it.

After World War II the global banking system began to create Eurodollars: offshore dollar loans that tie back to the US commercial banks via what I call a daisy-chain in the respective balance sheets and accounting customs. The Eurodollar loans made by financial dealers around the globe, but particularly in European money-centers, represented an offshore money multiplier for the global US dollar. Eurodollars are the more compelling story of the emergence of the global dollar. Petrodollars grab more headlines, and so do large volumes of offshore dollars that some politicians argue should be repatriated for domestic purposes, but the repatriation argument is a financially infeasible pipe dream.

Joe

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