The term 'petrodollar' described the U.S. dollar's (USD) role as the currency used for crude oil transactions on the world market. It traces back to the early 1970s when the United States and Saudi Arabia struck a deal shortly after the U.S. went off the gold standard – and the agreement has had far-reaching consequences for the global economy.

The petrodollar agreement came about following the 1973 oil crisis. It stipulated that Saudi Arabia would price its oil exports exclusively in U.S. dollars and invest its surplus oil revenues in U.S. Treasury bonds. In exchange, the U.S. provided military support and protection to the kingdom. 

This helped the USD cement its position as the world's reserve currency and ushered in an era of prosperity for Americans as they enjoyed the benefits of being the preferred market for global corporations to sell their wares. Additionally, the inflow of foreign capital into U.S. Treasury bonds has supported low interest rates and a robust bond market.