How does the dollar flow through the petrodollar system?

The petrodollar system refers to the arrangement in which oil-exporting countries, particularly those in the Middle East, denominate their oil sales in U.S. dollars. This system ensures a constant demand for dollars, which are then recycled back into the U.S. financial system. When oil-producing nations sell their oil, they receive payment in U.S. dollars. These dollars are often used to purchase goods and services from other countries or are invested in U.S. assets such as government bonds. This cycle of oil sales, dollar receipts, and subsequent investments creates a continuous flow of dollars through the petrodollar system, helping to maintain the global dominance of the U.S. dollar as the world's primary reserve currency.

This mind map was published on 1 January 2024 and has been viewed 39 times.