Oil trade is still crucial for the world economy, and the currency it is denominated in matters.
For decades oil trade was done in dollars, helping maintain US currency’s dominance as a universal unit of account. For some time already, however, the status quo has been put in question.
In 2018 the Chinese government issued the first long term oil trading contracts denominated in the so-called petroyuan, supposed to challenge the dollar standard. The war in Ukraine has accelerated the process, and the recent news about Saudi-Chinese talks about pricing oil contracts in yuan can mark the official beginning of the dollar’s decline.
Of course, pricing several Chinese oil contracts in yuan will not immediately shake the whole world’s business practice. It will, however, create a precedent.
And since the yuan itself has a number of problems, and China remains a highly authoritarian country that plays by its own rules, it may be just a matter of time until people and businesses (and not only in the oil industry) start to look for yet another currency to commerce internationally.
In the increasingly polarized world, however, it could be difficult to pick a fiat currency that would please everyone… unless the currency is independent and provably neutral. With high-speed international settlements and a limited supply.
Bitcoin has never been more relevant.