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← How the Petrodollar Works
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Question
Why does oil pricing in dollars create persistent structural demand for the US dollar from virtually every economy?
1
Oil futures contracts traded in Chicago set global prices; all countries must hold dollars to participate in price discovery
2
The IMF requires all countries to maintain dollar reserves equal to six months of import coverage
3
Oil-exporting countries require payment in dollars, so importers must sell their own currencies to buy dollars first
4
US financial sanctions prevent non-dollar oil transactions from clearing through international banking systems
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