page_title: Petrodollar recycling
section_title: 2005–2014 surge
hierarchical_section_title: Petrodollar recycling / Capital flows / 2005–2014 surge
caption_attribution_description: English: US CPI Inflation and 3 Month T-bill interest rates from 1960 to 2014, using data from the Federal Reserve Bank of St. Louis (series CPIAUCNS, TB3MS, MED3, DGS2).
context_page_description: Petrodollar recycling is the international spending or investment of a country's revenues from petroleum exports. It generally refers to the phenomenon of major petroleum-exporting nations, mainly the OPEC members plus Russia and Norway, earning more money from the export of crude oil than they could efficiently invest in their own economies. The resulting global interdependencies and financial flows, from oil producers back to oil consumers, can reach a scale of hundreds of billions of US dollars per year – including a wide range of transactions in a variety of currencies, some pegged to the US dollar and some not. These flows are heavily influenced by government-level decisions regarding international investment and aid, with important consequences for both global finance and petroleum politics. The phenomenon is most pronounced during periods when the price of oil is historically high.
  The term petrodollar was coined in the early 1970s during the oil crisis, and the first major petrodollar surge resulted in more financial complications than the second.
  In August 2018, Venezuela declared that it would price its oil in Euros, Yuan and other currencies.
context_section_description: In the 2005–2014 petrodollar surge, financial decision-makers were able to benefit somewhat from the lessons and experiences of the previous cycle. Developing economies generally stayed better balanced than they did in the 1970s; the world economy was less oil-intensive; and global inflation and interest rates were much better contained. Oil exporters opted to make most of their investments directly into a diverse array of global markets, and the recycling process was less dependent on intermediary channels such as international banks and the IMF.
  Thanks to the historic oil price increases of 2003–2008, OPEC revenues approximated an unprecedented US$1 trillion per year in 2008 and 2011–2014. Beyond the OPEC countries, substantial surpluses also accrued to Russia and Norway, and sovereign wealth funds worldwide amassed US$7 trillion by 2014–2015. Some oil exporters were unable to reap the full benefits, as the national economies of Iran, Iraq, Libya, Nigeria and Venezuela all suffered from multi-year political obstacles associated with what economists call the "resource curse". Most of the other large exporters accumulated enough financial reserves to cushion the shock when oil prices and petrodollar surpluses fell sharply again from an oil supply glut in 2014–2017.
caption: Inflation and interest rates surged with oil prices in the 1970s, but not in the 2000s.[23]
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