OPEC considers to use euro for pricing of crude oil
OPEC is considering a move away from using the US dollar -- and to the euro -- to set its price targets for crude
oil, the highest-profile manifestation of the debilitating effect of depreciation on the greenback's standing as the
currency of international commerce. Several members of the Organization of Petroleum Exporting Countries are seeking
formal talks on using the euro, as well as the US dollar, when determining price targets for crude, a senior oil
minister within the cartel said.
"There are countries that are proposing this," Venezuela's Oil Minister Rafael Ramirez said in Caracas. "It's out there, under discussion."
Mr Ramirez did not specify which OPEC members are pushing the proposal, but much of the impetus is believed to come
from Persian Gulf producers. They have seen their purchasing power in Europe pinched as the US dollar loses ground
against the euro -- including touching a record low. Any move to water down the use of the US dollar as the currency
would have enormous symbolic impact, said one prominent Canadian energy analyst.
"On a symbolic level, I think it's huge, not only for what it says about the US dollar, but also the implied change to the nature of energy trading worldwide in the future," said Wilf Gobert, vice-chairman of Peters & Co.
Beyond the blow to the greenback's prestige, a move by OPEC to even partly price in euros would ensure that any
further depreciation in the US dollar boosts oil prices, Mr Gobert said. And any country -- not just the United
States -- using the US dollar for pricing would see the cost of the commodity rise as that currency fell. Indeed,
while OPEC has yet to make any formal break with the US dollar, its refusal to boost output has already offloaded
much of the cost of the dollar's depreciation on to the American economy.
Mr Gobert said oil prices at the end of last month, about $ 32 a barrel, would have been much lower if not for the decline in the value of the US dollar over the past 24 months. Using the exchange rates of the dollar versus the euro two years ago, crude would be selling for $ 22 a barrel instead, he said.
All of the oil prices used in OPEC's benchmark index, or basket, are currently denominated in US dollars. The cartel
uses that index as the basis of its price-band policy, whose stated intent is to adjust output so the basket hovers
within a $ 22-$ 28 range.
Oil prices have lingered well above that maximum for 26 consecutive trading sessions, which in theory means that OPEC should have increased its output by 500,000 bpd to lower prices. But the cartel has ruled out doing so before its regularly scheduled meeting on Feb. 10, arguing that it is the depreciation of the US currency -- not a lack of supply -- that is fuelling the rally in crude prices.
Mr Gobert said he believes it is unlikely that OPEC will opt for a formal split with the dollar, although the cartel
may very well accomplish the same effect by raising its price band, he added.
But he said that OPEC's musings about adopting the euro are part of the increased chatter about the rising value -- and influence -- of the five-year-old currency among commodity traders and analysts.