Finance
Petrodollar
Definition
US dollars earned through oil exports, particularly by OPEC nations. The petrodollar system refers to the global practice of pricing and trading oil in US dollars.
Explanation
Since the 1970s Saudi-US agreement, oil has been priced and traded globally in US dollars. This creates permanent demand for dollars, supporting reserve currency status. Saudi Arabia, UAE, Kuwait, and other exporters accumulate petrodollar surpluses that are recycled into US Treasury bonds and global investments. Challenges to this system (China buying oil in yuan) are closely watched.