In 1974, the world was embroiled in a war in the Middle East between Arab states and Israel, the latter seeking to expand its territory. Saudi Arabia, the world’s largest oil producer, responded by imposing an oil embargo on Israeli allies, including the United States, triggering the 1970s oil crisis. As peace talks commenced and tensions eased, the U.S. negotiated a deal offering military protection and aid to Saudi Arabia in exchange for exclusive oil trade in U.S. dollars. Thus, the petrodollar system was established.

The petrodollar operates akin to a mafia boss demanding protection money from local businesses. Whenever Saudi Arabia sells oil, the United States receives a share of the proceeds. This arrangement enabled the U.S. to borrow substantial sums from central banks. Originally a 50-year agreement, the petrodollar deal has now expired, and Saudi Arabia has chosen not to renew it.

What does the end of the petrodollar mean? The petrodollar, a significant income source for the USA estimated at $3.2 trillion annually, fluctuates based on oil trading volumes and barrel prices.

With Saudi Arabia shifting to trading oil in multiple currencies, they stand to increase revenue, potentially leading to lower oil and gasoline prices for consumers. The short-term impact on America is uncertain, but many independent observers anticipate it could signal the decline of America as a superpower and also affect living standards in the long term.

Jimmy Dore is among the few independent media outlets covering the end of the petrodollar system.