Opec has “no alternative” but to continue using the US dollar to trade its produce, Qatar’s Energy Minister Abdullah bin-Hamad al-Attiyah said on 17 May.
“It is very difficult to navigate,” Al-Attiyah told MEED at the Opec conference in Doha. “For 100 years, the world has been trading oil in US dollars. Every time the dollar weakens there are voices saying that we should be replacing the US dollar for the Euro. But we have no alternative.”
Al-Attiyah said the recent slump in the value of the Euro has shown that all currencies are vulnerable to volatility.
The Euro sank to $1.223 on 17 May, its lowest point since April 2006, as fears continued over the ability of some member states to repay sovereign debt.
In 2008, Opec’s secretary general Abdalla Salem el-Badri told MEED that Opec’s 13 member states were considering moving from the US dollar to the European single currency, the Euro, because of a decline in the value of the “greenback”.
If the currency that a commodity is traded in slumps in relation to the domestic currencies of its consumers then prices are often forced up because buyers can afford to buy more of the product. Likewise, if the buyer’s currencies strengthen then prices fall.This adds volatility to the pricing of commodities like oil, which are predominately traded on open markets in US dollars.
The dollar sank to a record low against the Euro of more than $1.60 in July 2008 on the back of fears over the US’ economy as the credit crunch took hold. The US’ benchmark West Texas Intermediate contract hit record highs over $147 a barrel at the same time, leaving many producers, consumers and traders to question the logic of using the volatile dollar to buy and sell oil.
Previous attempts at creating a basket of currencies after a slump in the value of the US dollar in the 1970s was unsuccessful, he said – “it didn’t work” – and no single currency can offer the desired price stability.
“I don’t believe there will be any one safe currency,” Al-Attiyah said. “Even with the Chinese Yuan there are dangers. There will be a lot of pressures on Chinese currency. There is no [completely stable and] transparent monetary system in the world.”
A move to the Euro in 2008 could have proved damaging, as could any currency change, he added: “Some [countries] would like to get out of the Euro, some want to revive it. There is a real uncertainty over currencies. If we changed currencies to suit the time we would have to jump currency every month and that would not solve anything.”