The march of the dollar .. From the yellow metal to the black liquid!

News from the island

• Despite the blockade .. IMF expects the growth of the Qatari economy 3.1%
• The Sudanese seek liberation from their economic crises
• Algeria .. Islamic banks an economic solution or a legitimate necessity?
• How did the Turkish lira crisis affect the German economy?
• Artificial intelligence revives the global economy and threatens workers

In an earlier article, we mentioned the story of the American adventurer Columbus Junner, who in 1930 succeeded in drilling the first oil well in East Texas, challenging the geologists who were asserting the impossibility of oil in that region. Columbus was a risk-averse investor seeking high-risk returns. Over a period of no more than six months, a number of small explorers gathered in East Texas trying to exploit the opportunity, which jumped the production of the site to more than 340 thousand barrels per day. A year later, the field (known as the Black Giant) became one of the largest in the world with a production capacity of more than 500,000 barrels a day (a huge rate compared to that of the time).

Legislation in Texas did not give state authorities the right to interfere in the regulation of oil production. As oil production in East Texas increased by micro-enterprises, markets were dumped in a world unaddressed, leading to the first oil price crash in history. The price of Texas crude fell from one dollar to 15 cents ($ 0.15). Some companies were forced to sell their oil at just US $ 2 (US $ 0.02). It is worth mentioning that the cost of production per barrel in that period was in the range of 70 to 80 US cents.

The chaos of production and the imbalance between supply and demand led to a price war between large and small companies. East Texas production rose at the end of 1931 to 1 million barrels a day, half of US consumption. The impact of the chaos was not confined to the US oil market, but also spread to the global market. At the time, the United States was the main producer and controller of the world oil market. But by the early 1930s, a new player seemed to be on the horizon. The huge discoveries made by US-based Standard Oil scientists in the deserts of Saudi Arabia have shown that it is the remote spot of the world that will control the world oil market.

In February 1945, US President Franklin Roosevelt returned from Malta aboard his presidential cruiser and saw the opportunity to meet the Saudi king, Abdul Aziz bin Saud (the move was without the knowledge of the British). President Roosevelt stopped in the Mediterranean and sent a small steamer to his grandfather to bring the Saudi king and a few of his entourage. This was the first and last meeting ever between the two countries' leaders. The meeting in which the Quincy Convention was signed, although the provisions of the Convention were not disclosed in a transparent manner, but most of its provisions were later leaked.

President Roosevelt pledged to the King of the United States of America to provide full protection for his fledgling kingdom and stand by it against the ambitions of the great powers. He also pledged to ensure the continued rule of the Al Saud family and its unlimited support against domestic and regional threats. In return, King Abdul Aziz pledged not to allow non-US companies to drill for oil on Saudi soil and to adopt the US dollar as the sole currency in the sale of Saudi oil.

The 1970s are a period of great financial and political transformation. In 1970, the volume of dollars traded on world markets was approaching the $ 300 billion mark. While the amount of gold reserves in Fort Knox is not more than 14 billion dollars at the official price set by the Bretton Woods ($ 35 an ounce).

Some analysts believe that the big drawback between the printed dollars and their coverage of gold is the expansion of the US government in issuing the dollar to cover the costs of the Vietnam War and its massive spending during the Cold War. Such action was certainly a clear violation of the Bretton Woods Agreement. Although the US government at that time was the largest gold owner in the world, but the imbalance between the supply of dollar and gold-owned was expanded further in the late 1970's. In mid-August 1971, President Nixon took his shaky decision to withdraw from the Bretton Woods Treaty and disengage the dollar from gold.

The actual outcome of the US decision was to replace gold with the dollar and to impose the US currency on the world as a fait accompli by enabling the US government to print as much dollars as there are those who trust and want to own. Because the US government as mentioned above was the largest gold owner in the world, has dominated the supply and demand, bringing the price of gold ounce to $ 350 (ten times the price of the protein Woods). That decision freed a formal death certificate for what was known as "criticism", which had dominated trade and exchange since history. He also announced the beginning of what is known as "speculative economics", a new pattern that mankind has never known before. On the other hand, the decision allowed the US government to sell its reserves of gold ten times the price of the Bretton Woods.

The oil crisis has helped the US dollar to shift from a non-gold, non-gold, to a commodity that the world is struggling to obtain to ensure its energy purchases

The island

President Nixon did not have much luck, and only a few months later he withdrew from the Woods protein until he was involved in a water scandal. According to a number of analysts, President Nixon may have paid a heavy price for his tough stance against the Zionist lobby in Washington! With Nixon preoccupied with the effects of the Water Gate, the Jewish fox Henrey Kissinger was given the opportunity to relinquish US foreign policy. His dominance over external affairs has exacerbated the situation in the Middle East, which led to the outbreak of the 1973 war and its consequences from King Faisal's announcement that Arab oil supplies were cut off from the West.

Oil prices have witnessed an unprecedented escalation as a result of the cessation of Arab oil sales to Europe and America. The price of a barrel of oil has risen to four times its pre-boycott price. European countries have found themselves in an unenviable position. In the United States, the province had a dual effect. At the local level, the lack of fuel in the filling stations and the large increase in its price is a source of alarm for the American citizen. The Federal Reserve was not a troubling crisis at all, but a festival of profit-taking and revenue expansion. The increase in the price of oil led to an increase in the demand for the dollar, which enabled the Fed to double the printing of the US currency at unprecedented levels.

The oil crisis has helped the US dollar to shift from a non-gold, unwelcome gold sheet in the major industrial countries, to a commodity the world is scrambling to get to ensure its energy purchases. The US plan succeeded in unlinking the dollar from the yellow gold and linking it through a Catholic marriage to black gold. Decision makers noted the importance of oil as the most important source of energy, which increases its strategic value and increases the demand for it not only by the major industrialized countries, And Third World countries as well. In this effort, I have tried to present the reader with a brief account of the close link between the oil markets and the green US currency. In the next episode we try, God willing, to shed light on some of the ambiguous aspects in the worlds of criticism and energy.