While the international prices of record for crude oil may be denominated in dollars, there is nothing stopping buyers and sellers from making any kind of contract arranagements they want in whatever currencies they want — euros, zlotys, rubles, yuan, bolivars, gold dinars, whatever. Even barter is possible. There are no laws or international regulations that require oil be bought and paid for in dollars.

That said, however, it is important to note that the very complex system of international reference prices based upon New York light, sweet crude (West Texas Intermediate), UK Brent Blend and Oman/Dubai are all denominated in dollars. This has several benefits. First, the primary consumer (and importer) prints and controls the value of (to an extent) the currency, no small thing when many buyers have got to have your money to buy a commodity. Second, as I understand it (and someone tell me if I am wrong), much of the world’s dollar-denominated banking system is routed through New York, even if the transaction doesn’t involve an American sender or recipient.

And then the commodities bourses are speculative ventures, used not only by oil shippers and companies that want to hedge production and supply, but also by paper traders who seek to make a profit. Remember, on the New York Mercantile Exchange there are ten contracts to buy or sell crude oil for every barrel out there.

Any concern that Rockefeller World Empire (to quote Murray Rothbard) might have about official reference prices for crude oil in a currency other than the dollar is about nothing other than maintaining control over the world’s reserve currency and its banking system — thus maintaining some kind of control over the world. While Iraq demanded payment in Euros, Saddam’s demand was small fry — few nations weree going to follow his lead into Euroland. I doubt it was a serious motivation for the 2003 invasion. And everytime over the last two decades that the dollar plunged in comparison to Asian currencies, thus increasing the bill for imports of consumer goods, Iran would lead a charge to change how crude was priced, from the dollar to a basket of currencies (including the yen). That got little traction, as America’s historic allies in the region — Saudi Arabia, Kuwait and the UAE — have currencies hard-pegged to the dollar and have always guaranteed their support for dollar-denominated oil and the economic health of the world’s largest customer.

If, however, Iran could make a non-dollar oil bourse work (a big IF) and allow for alternative, relatively transparent non-dollar reference prices to come into existence, it would eventually lead to lower demand for dollars as well as create an alternative banking system that flows through something other than New York. One that could not be policed, sanctioned or shut down by the US government. Venezuelan President Hugo Chavez clearly like the idea, and normally staunchly pro-US Saudis may not be so averse either (witness the fact that King Abdullah’s first overseas trip was to China, and not the US). I’m still not so sure such a thing would work — the dollar-based trading and pricing infrastructure is huge, and already exists. It’s hard to start a new bourse from nothing.

But it’s also very likely that America’s ruling elites would not like such a system, either. And it would be fairly easy to bomb that bourse out of business.

Eventually, someone will get a non-dollar oil bourse off the ground, likely in Singapore, Hong Kong or Shanghai, and not in Tehran. American military and economic power is finite, and is becoming more and more finite all the time.

The Best of Charles H. Featherstone