From Gold to Petrodollars: How Nixon’s 1971 Decision Shaped the Oil Market
In 1971, President Nixon ended the dollar’s convertibility into gold. Until then, the US had promised to exchange $35 for one ounce of gold. This move, known as the “Nixon Shock,” freed the dollar from its gold backing. That same year, the US proposed a deal to Saudi Arabia. Riyadh agreed to sell its oil exclusively in US dollars. In return, Washington guaranteed security support for the kingdom. Saudi Arabia then persuaded other OPEC members to follow suit. Oil trading shifted to dollars worldwide. This arrangement created permanent global demand for the US currency and gave birth to “petrodollars.”
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