Second, the new petrodollar standard meant increased global demand for US Treasury bonds. Foreign governments needed to keep big reserves of dollars on hand to buy oil. But naturally, they figured they might as well earn interest on those dollars while they were holding them. So, when the cash wasn't actually being used, they would simply put as much of it as possible into US Treasury bonds. With trillions of foreign dollars positioned to buy up our Treasury bonds (thereby cheaply financing our growing indebtedness and by that means allowing most Americans to live way beyond the means they would otherwise have), the Fed could pump unlimited money into our economy, and it ended up doing that for what turned out to be a period of four happy decades.
Third, the petrodollar meant that the energy-dependent United States could buy all the imported oil it needed -- with dollars that it could simply print at will!
The petrodollar was also a boom for the Saudis. Saudi Arabia and OPEC pump obscenely large amounts of oil -- 30 million barrels a day -- about half of the total world production. From this they collected huge profit margins -- as much as $45 profit for each of those 30 million barrels of oil.
Five Decades of "The World's Greatest Businesses"
Over the past five decades, oil has been the main income source of some of the wealthiest people in the world. And of course, the outrageous OPEC oil wealth is not just limited to individuals. For example, Saudi Arabia's foreign currency reserves not long ago rocketed up to $736 billion. Other OPEC nations have also built up multibillion-dollar reserves. Even lowly Algeria, for example, had more than $200 billion in the bank. In a nutshell, members of OPEC became very wealthy, thanks to "The Nixon Shock."
But 42 years after the dawn of the petrodollar, OPEC's gravy train is coming to an end
And here's where the story got really interesting for American investors. No one would have expected that American oil might end up becoming OPEC's deathblow. Solar? No way. Perhaps nuclear? Maybe. But certainly not American oil or gas, which seemed to have gone virtually dry decades ago. However, in the early 2000s, advances in oil and gas-well technology (in particular, fracking) made petroleum recovery far more efficient, and much cheaper, than ever before.
As a result, since 2007, America has experienced an energy resurgence nobody saw coming. Shale oil production more than doubled, to 2,800 barrels per day, from just 1,200 barrels/day. Plus, our natural gas reserves ballooned to over 350 trillion cubic feet in 2013, from 225 trillion cubic feet in 2007, an increase of more than 55%.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
1
1
1
