Oil-trade dollar boycott 'would not affect prices'

6 October 2009

07 October 2009 | Allie Anderson

A reported plot to stop oil being traded exclusively in US dollars would be unlikely to have an impact on future prices, an analyst said.

According to a report in the Independent yesterday , Arab states have been in secret talks with China, Russia, Japan and France, to end the system that gives oil prices in US dollars.

Under the proposal, the newspaper reported the deals would be struck in "a basket of currencies" including the euro, Japanese yen, Chinese yuan and a new unified currency for member nations of the Gulf Cooperation Council, including Saudi Arabia and the United Arab Emirates.

The report was quickly denied by officials in several countries said to be involved in the talks.

Damien Cox, analyst and head of market reports at energy procurement consultancy EnergyQuote, told SM any change would be unlikely to affect what buyers pay for oil.

"So many factors affect the price of oil. They move as a function of the stock market and supply and demand, for example. If there is no demand for oil, prices won't go up," he said.

Cox was also sceptical the pricing overhaul would go ahead. "What happens when the dollar strengthens?" he said. "Are they going to switch back from whatever currency they say they are going to trade in? We have heard this before and nothing has happened."

SMoct2009

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