The Petrodollar: How America Made the World Buy Oil in Fiat Dollars — And Trapped Everyone In It

Thu, 16 Jul 2026 09:16:48 +0200

In 1971, the United States cut the dollar loose from gold and gambled the entire global economy on a single question: what gives a piece of paper its value once the metal underneath is gone? The answer turned out to be oil — and the deal that made it happen was kept secret for forty-one years.

This is the story of the petrodollar: how a moment of weakness became the most durable instrument of power any nation has ever wielded. From the collapse of Bretton Woods and the Nixon Shock, to the 1973 oil embargo that quadrupled prices overnight, to the chain-smoking Wall Street bond trader who flew secretly into Saudi Arabia in 1974 to strike a deal that would anchor the dollar to the world's most essential commodity.

But this isn't just a story about American advantage. It's a story about a trap. We follow the petrodollars on their journey — from oil importers, into Gulf treasuries, through Western banks, and out as cheap dollar loans to the developing world. Then we watch Paul Volcker raise interest rates to nearly twenty percent and the bill reset overnight, triggering Latin America's "lost decade," sovereign defaults, and more than twenty million people pushed into extreme poverty.

We separate documented history from myth: the real secret Treasury bond arrangement versus the viral "single 1974 oil treaty" that never actually existed. We look honestly at the contested "petrodollar war theory" surrounding Iraq and Libya — what's proven, what's speculation, and why the truth refuses to be neat. And we examine whether the system is finally cracking, with the dollar's reserve share at a three-decade low, the rise of the petroyuan, and central banks quietly stacking gold.

How did America make the world buy oil in dollars? And who really got trapped in it?

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