From petrodollar to AI dollar: Can the greenback continue to rule?

[SINGAPORE] The foundations of dollar power are shifting. One of its pillars has been the petrodollar. The oil shocks of the 1970s generated enormous current-account surpluses for oil exporters, who accumulated dollar deposits and US securities while Western banks recycled some of these petrodollars as loans to developing countries.

The petrodollar’s heyday ran from the 1970s to the early 2010s, although oil revenues weakened during parts of the late 1980s and 1990s.

From 2014, its importance gradually diminished. The shale revolution reduced US dependence on imported oil, oil prices became less consistently high, Gulf states diversified their investments, and China, Russia and countries under Western sanctions experimented with non-dollar settlement. At last week’s Brics summit, members committed to promoting the use of local currencies for trade settlements.