Pricing of Oil in Euros Is Unlikely To Affect Dollar, Experts Say
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
WASHINGTON — With Iran’s president threatening to price oil in euros, economists and experts say the value of the dollar is unlikely to take a serious hit.
Over the weekend at a summit of the Organization of Petroleum Exporting Countries, OPEC, the Iranian and Venezuelan presidents pushed their fellow oil states to begin pricing oil on the world market in euros and not dollars. Saudi Arabia rejected the proposition.
Nonetheless, the threat from Venezuela and Iran, two states now run by leaders suffocating indigenous institutions, raised eyebrows in Washington. The Associated Press yesterday quoted President Ahmadinejad of Iran as saying, “They get our oil and give us a worthless piece of paper,” referring to the dollar whose value has dropped in the last three years.
President Chavez of Venezuela went even further, threatening that the price of oil would double if America attacked Iran.
A State Department official yesterday said of Mr. Ahmadinejad’s remarks, “If I were the president of a country that had a per capita income more than 14 times smaller than the United States and almost entirely based on oil exports, I don’t think I’d be insulting anybody’s currency.”
Some sectors of the economy benefit if the dollar is weak, while others benefit when the dollar is strong. For example, a strong dollar benefits the importers of goods and financial houses that make overseas investments. When the dollar is weak, the price of American manufactured goods falls.
The chief economist for the American Petroleum Institute yesterday told The New York Sun it was highly unlikely that OPEC nations would begin pricing oil in euros. “Anything they do to cause the dollar to depreciate really harms them because the dollars they hold would be worth less,” John Felmy said.
Mr. Felmy added that pricing oil in euros would devalue the dollar. “There are inflation implications, an implication in terms of currency movement, what are people willing to hold. You would have less willingness to hold dollars, and there is a potential for a spiral.”
The director for international trade and economics at the Heritage Foundation, Ambassador Terry Miller said even if oil was priced in euros, it would have a negligible effect on the American economy. “If OPEC prices oil in euros, there is no immediate impact on the United States. If it increases the demand, converting dollars into euros, we already do that every day, this would add to the flow but would not necessarily change the values. The value of the dollar has more to do with the controls over the flow of money, they can react to the flow of money,” he said.
Mr. Miller added, “I don’t consider this a real threat. The dollar has proved to be a stable value for the OPEC cartel for importers and exporters, what you have in the dollar is a currency that is not subject to political manipulation as other currencies are. I don’t think it’s likely people will start a run now, particularly the Saudis who hold billions of dollars now. It doesn’t make any sense for them. “