On June 9th, 2024, a 50-year old agreement between the United States government and the Saudi kingdom expired, sparking viral claims about the end of the "petrodollar" and U.S. dollar dominance. The news has resulted in hundreds of blogs, articles, and news reports discussing the potential implications for the relationships between the two nations. This scrutiny comes right as a newly released 9/11 tape appears to show the Saudis were aware of plans to attack the U.S. at least two years before the September 11th attacks.

However, on closer examination, the petrodollar situation is more nuanced, with the U.S. and Saudi Arabia continuing to partner while the Saudis prepare for new arrangements with China.

What Is The Petrodollar?

The term petrodollar is often used in several different ways, all of which relate to the U.S. dollar being the world's dominant reserve currency. Most often, the petrodollar is mentioned in reference to oil being bought and sold using the USD.

The petrodollar also refers to agreements established between the U.S. and the Organization of the Petroleum Exporting Countries (OPEC) during the 1970's.The U.S. convinced the OPEC nations to invest their petrodollars into Western nations. Specifically, the U.S. convinced the Saudis to purchase billions of dollars in US debt in exchange for U.S. military equipment. In 2016, Bloomberg reported on the arrangement:

"The basic framework was strikingly simple. The U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America's spending."

This arrangement has been the standard between the two governments for the last 50 years. The changing of this agreement would have drastic implications, and this is why reports claiming the end of the petrodollar went viral.