Oil Dollar System Faces Pressure Amid Shifts in Global Energy Trade

The oil dollar system, traditionally supported by U.S. oil demand, dollar-denominated oil pricing, and security ties between the Gulf region and Washington, is currently under strain. According to Jin10, the United States' new status as a net energy exporter means it is less reliant on Middle Eastern oil supplies. Additionally, the practice of pricing oil in dollars has been deteriorating even before the outbreak of war, with many countries striving to conduct energy trade in their own currencies, albeit with limited success. The most significant challenge arises from the war, which has cast doubt on the U.S. protective policy and the Gulf region's trust in it. A report released by Deutsche Bank on Tuesday highlights that the oil dollar system was already under pressure before the war. Currently, most Middle Eastern oil is directed towards Asia, while sanctioned Russian and Iranian oil is traded in non-dollar currencies. Furthermore, Saudi Arabia is localizing its defense industry and exploring non-dollar currencies for oil transactions.