Petroleos de Venezuela SA (also known as PDVSA – PVZ.YY), the state-run oil company (and parent of the U.S. Citgo) of Venezuela is being instructed to switch its accounts from U.S. dollars into euros. This is just another country in a line of countries that are steering oil from the U.S. dollar and requesting that investments and transactions be made in other currencies. Bloomberg reports on this move by Venezuelan president Hugo Chavez:
Venezuela moved some of its reserves into euros last year, along with other oil producers including the United Arab Emirates, Kuwait and Qatar. The $50 billion Qatar Investment Authority said Sept. 4 it was looking for options in Asia to counter a weak dollar. China is starting a fund to look for higher returns on some of its almost $1.4 trillion holdings.
Indeed, countries hostile to the U.S. are doing their utmost to undermine the U.S. dollar and the economy. In July, Iran requested that oil shipments to Japan be paid for in yen rather than in dollars, as was done for decades.
While PDVSA alone is not enough to make a big impact on the U.S. dollar, combining the impact from the company's $23 billion in assets with other countries' moves away from the U.S. dollar could add up. And the next question, beyond where the dollar will go on the forex market, is: What will happen to U.S. Big Oil companies like XOM and CVX if they are forced to use the more expensive euro for transactions?
Disclosure: I do not own stock in any of the companies listed above. I won't even buy gas from Citgo.