For the last 50 years or so, oil has been traded exclusively in dollars. Oil-exporting countries receive dollars for their exports, making their economies dependent on the value of the American currency.
<h2>History Of The Petro-Dollar System</h2>
The petro-dollar system has its roots in the historical <a class="editor-rtfLink" href="https://www.investopedia.com/ask/answers/09/gold-standard.asp#:~:text=The%20gold%20standard%20is%20a,sells%20gold%20at%20that%20price." target="_blank" rel="noopener">gold standard system</a>. After the Second World War, with most of Europe in disarray, the United States held the bulk of the world’s gold supply.

In a bid to both rejuvenate the global economy and position itself as a world leader, the U.S. agreed to redeem any dollar for its value in gold if other nations pegged their own currencies to the American dollar.

At the 1944 Bretton Woods conference, 44 allied nations signed on to the deal offered by the Americans and formally established the U.S. dollar as the world’s reserve currency.

But in 1971, with the U.S. suffering from high inflation and a stagnating economy, many of the nations that had signed up to the gold standard asked to redeem their dollars for gold. After the run on American gold, President Richard Nixon removed the dollar from the gold standard system in order to protect whatever remained in the country’s gold reserve.

Almost a decade later, the United States entered into a pivotal economic partnership with the Kingdom of Saudi Arabia, where they agreed to use the dollar for oil contracts. With Saudi Arabia becoming the largest exporter of oil in the world, the influence of the dollar in global trade has grown by leaps and bounds.

The United States, in turn, used the dollar’s power and influence in the hugely important petroleum industry to enforce its foreign policy. 

Many nations that have found themselves on the receiving end of American sanctions have been unable to fight back, fearing the collapse of the petro-dollar system and, with it, the global economy.
<h2>Russia And China Seeking Petro-Dollar Alternatives</h2>
Recently, major economic powers like Russia and China have made calls to <a class="editor-rtfLink" href="https://www.dw.com/en/russia-to-ditch-dollar-from-national-wealth-fund/av-57781008" target="_blank" rel="noopener">replace</a> the dollar as the global reserve. However, it was felt that there were no good alternatives.

Now, there is a growing feeling among analysts that Bitcoin could be the neutral reserve asset opponents of the dollar system have been looking for.

Russia’s invasion of Ukraine and the subsequent sanctions and embargoes placed on it by the United States and its NATO allies have forced Russia to rethink how it sells its oil and gas and how it organizes its national wealth fund.

US.-led sanctions caused the Russian ruble to lose more than 20% of its value in just a few short weeks. The sanctions also made it impossible for Russia to access its <a class="editor-rtfLink" href="https://www.cryptoknowmics.com/news/arizona-introduces-bill-to-make-bitcoin-legal-tender/" target="_blank" rel="noopener">dollar reserves</a>, worth an estimated $185 billion, to shore up its economy and its ailing currency.

The world’s leading producer of natural gas and second-largest exporter of oil has been experiencing difficulties selling its products because of the petro-dollar system.

But recent events suggest that Russia is thinking of taking advantage of the statelessness of the cryptocurrency system to circumvent restrictions placed on its oil-exporting business.

Pavel Zavalny, chairman of the State Duma Committee on Energy, recently suggested that countries like China and Turkey, which Russia considers friendly, could be allowed to pay for Russian oil and gas using their own currencies. 

More interestingly, Zavalny also mentioned that countries friendly to Russia could also make oil payments using Bitcoin. This new direction could see Bitcoin play a prominent role in the global economy and signal the loosening of the dollar’s vice-like grip on international trade.

What was once merely a hopeful concept could become a practical application with major geopolitical ramifications.
<h2>Australian Oil Retailer Set To Accept Bitcoin Payments</h2>
Meanwhile, in the land down under, an oil marketer’s decision to accept Bitcoin payments is also shining a spotlight on the growing importance of BTC in the petroleum industry.

On The Run (OTR), one of Australia’s largest oil retailers is <a class="editor-rtfLink" href="https://www.whichcar.com.au/news/south-australian-fuel-stations-to-begin-accepting-bitcoin" target="_blank" rel="noopener">allowing</a> its customers to use Bitcoin to pay for gasoline. The company is partnering with Crypto.com, a Singapore-based cryptocurrency trading solution, to roll out processing terminals in more than 170 gas outlets owned by OTR to facilitate BTC payments.

This move has been hailed by industry observers as further proof of Bitcoin’s growing importance in the energy sector. Referring to OTR’s decision, UK-based digital assets analyst Marcus Sotiriou, said:

“This adds more weight to the idea of Bitcoin becoming a petro-asset after Putin recently allowed friendly countries to pay for oil in Bitcoin.”
<h2>Bitcoin Miners Use Natural Gas To Power Mining Operations</h2>
Bitcoin’s newfound association with the oil industry is not limited to being a medium of exchange alone. Bitcoin miners are also taking advantage of “stranded” natural gas to power their mining activities. 

Mining BTC is an energy-intensive process, and environmentalists have protested against the huge carbon footprint created by Bitcoin mining. It is estimated that one Bitcoin transaction uses enough energy to power a typical American household for more than two months.

At the same time, oil companies have been venting and flaring natural gas that could not be commercially exploited, especially on offshore rigs. Every day, nearly 1.5 billion cubic feet of natural gas are wasted in this way in the U.S. And just like BTC mining, flaring and venting natural gas leaves an indelible carbon footprint too. 

But now, these two groups have come up with a more environmentally friendly <a class="editor-rtfLink" href="https://www.protocol.com/bulletins/exxon-bitcoin-mining-gas-flaring#:~:text=According%20to%20Bloomberg%2C%20Exxon%20has,and%20was%20expanded%20last%20July." target="_blank" rel="noopener">solution</a> to both their problems: a need for cheap and plentiful electricity and a way to stop polluting the atmosphere with methane. How have they done this? The oil companies are running unwanted methane into generators to produce electricity, which is then sold or given for free to BTC miners. 
<h2>Bitcoin’s Dalliance With Oil Could Do Wonders For Its Price</h2>
So now, not only is Bitcoin being used as a medium for petroleum transactions but its very creation will soon be anchored on the back of the petroleum industry.

This progressive intertwining with the global energy sector could potentially see the price of BTC reaching a new all-time high (ATH) in the near future.

There is a probability that the crisis in Ukraine will <a class="editor-rtfLink" href="https://www.cryptoknowmics.com/news/sec-approves-nyse-arca-and-teucrium-to-host-bitcoin-futures-etf/" target="_blank" rel="noopener">prompt</a> more countries to reconsider their dependency on the dollar. And if, in the near term, Russia and her allies successfully use Bitcoin to bypass sanctions, then the cryptocurrency could be well-placed to usurp the dollar as the world’s go-to reserve asset. 

But first, there will be a need to overcome BTC’s relative lack of liquidity if the cryptocurrency is to support the sort of high-value transactions that happen in the oil export industry.

While talk about Bitcoin hitting the million-dollar mark is currently a bit far-fetched, there is no doubt that if Bitcoin became an acceptable medium of exchange in the oil economy, then they're certainly would be a sharp increase in its value.

Bitcoin’s volatility has mostly been caused by retail investors and speculators betting on BTC’s price increase with nothing in the way of fact or reason to back them up. 

But now, the crypto market is more mature, and institutional investors are taking bigger bites of the Bitcoin cherry. Additionally, regulatory authorities are making rules to govern the crypto sphere and cull the lawlessness that once existed in the space.

With more stability and potential use-cases in key economic sectors, the price of Bitcoin can only go up and even surpass the $68,789 ATH set in November 2021.

Is Bitcoin Becoming A Petro-Asset? New Move Could Send Prices To The Moon

Adam is an outgoing young lad who likes adventures and discovering new things.Despite his boring life, he loves writing about cryptocurrencies and exploring what blockchain technology can do for the coming digital world where all adventures will be virtual.

Is Bitcoin Becoming A Petro-Asset? New Move Could Send Prices To The Moon

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