Bitcoin and the Petrodollar: What Is Changing?

Short answer: Less is changing about the petrodollar than headlines claim. Oil is still mostly traded in dollars, and the "end of the petrodollar agreement" in June 2024 never happened. What is changing: individual countries settle oil in yuan, rupees or dirhams, and the dollar's share of world reserves is slowly falling. Bitcoin plays practically no role in the oil trade today. It is conceivable as a neutral reserve that nobody can freeze, not as a currency for oil invoices.

When people talk about the "end of the petrodollar", the next sentence often follows straight away: "And then bitcoin goes up." Both deserve a closer look. This article explains how the petrodollar came about, which myths surround it, what the figures show about the dollar and where bitcoin honestly stands in this picture.

What is the petrodollar?

Petrodollar means two things. First, the dollars that oil exporters earn for their oil. Second, the cycle in which these dollars flow back into the US. The economist Ibrahim Oweiss coined the term in 1973.

The cycle works like this:

1. An importer, say a refinery in Japan, needs oil. The price is in dollars, so it obtains dollars.
2. The exporter, say Saudi Arabia, takes in more dollars than it spends itself.
3. It invests the surplus: in US Treasury bonds, bank deposits, shares or stakes in companies.
4. With this, the US finances part of its debt at lower interest rates than it would have to pay without this demand.

Experts call steps 3 and 4 recycling. The dollars leave the US to buy oil and come back as loans to the US government.

How the petrodollar came about: 1971 to 1974

1971: the dollar loses its gold backing

Until August 1971, foreign central banks could exchange their dollars for gold with the US government at $35 per ounce. On 15 August 1971, President Nixon closed this "gold window". Since then the dollar has been pure paper money, backed only by trust in the US state. How this monetary system works is explained in The fiat money system explained simply.

1973: oil embargo and price shock

In October 1973, Arab oil states imposed an embargo on the US and other supporters of Israel in the Yom Kippur War. The oil price quadrupled within a few months. The exporting countries suddenly took in far more dollars than they could spend. For the US the question was: where does this money go?

1974: the arrangements with Saudi Arabia

In 1974 the US and Saudi Arabia made two arrangements that still form the core of the petrodollar today:

• In June 1974, the two countries set up a joint commission on economic cooperation. The US offered help with industry, infrastructure and the military. In return, Saudi Arabia bought American goods and services.
• In the summer of 1974, US Treasury Secretary William Simon negotiated a confidential deal: Saudi Arabia was allowed to buy US Treasury bonds outside the regular auctions, and the US kept the size of these holdings secret. For decades, the US Treasury published Saudi Arabia's holdings only lumped together with other oil exporters. Only in 2016 did it show the figure separately.

On top of that came security: the US stood behind the kingdom's protection. No single document in which Saudi Arabia commits to selling oil only for dollars is known. The petrodollar rests on interests, not on a contract clause.

Myth: the petrodollar agreement expired in 2024

In June 2024, a story spread on social media and finance sites that Saudi Arabia had not renewed a 50-year-old petrodollar agreement. It had supposedly expired on 9 June 2024. Many bitcoin channels picked it up as the start of the dollar's end.

The story was false:

• The 1974 arrangements had no expiry date that could have ended in 2024.
• They contained no obligation to sell oil exclusively for dollars. So there was nothing that could expire.
• Saudi Arabia has announced no exit. The Saudi riyal is still pegged to the dollar, at 3.75 riyals per dollar since 1986.

Economists and fact-checkers quickly contradicted the story. It persisted anyway, because it fit an existing expectation so well.

What the figures show about the dollar

Its share of world reserves is falling slowly

Every quarter, the International Monetary Fund (IMF) records the currencies in which central banks hold their foreign exchange reserves. This statistic is called COFER.

Source: IMF, COFER, as of Q2 2026 (published 30.09.2026).

That is about 14 percentage points in 27 years, roughly half a percentage point per year. The euro holds about 21%; all other currencies lag far behind. The full table and what else central banks hold is in Bitcoin as a reserve currency.

Important: the share the dollar loses does not go to a single challenger. It is spread over many smaller currencies such as the Canadian and Australian dollars, and over gold, which central banks have been buying on a large scale since 2022. Why is explained in Why central banks are adding to their gold reserves.

In currency trading the dollar is almost always involved

Its position in daily trading is even clearer. According to the survey by the Bank for International Settlements (BIS) from 2022, the dollar was one of the two currencies in 88% of all foreign exchange trades. Even someone exchanging yuan for reais often goes via the dollar, because that is where the deepest market is.

Signs of de-dollarisation and their limits

What is actually moving

• Russia has sold its oil mostly to China and India since the 2022 sanctions and is often paid in yuan, rupees or dirhams. The reason: Russia's dollar and euro reserves were frozen.
• China has traded crude oil futures in yuan on the Shanghai exchange since 2018 and has built its own payment system, CIPS, alongside SWIFT.
• Saudi Arabia agreed a currency swap with China worth 50 billion yuan in 2023 and joined the mBridge pilot project in 2024, through which central banks pay across borders in their own digital currencies.
• Central banks are buying gold as they have not in decades.

The common cause: since Russia's reserves were frozen in 2022, every state knows that dollar reserves can be blocked. Anyone who might come into conflict with the West looks for alternatives. How the BRICS countries approach this is shown in BRICS and bitcoin.

What holds the dollar in place

The limits are just as clear:

1. No market of equal size. There is no other bond market as large, as liquid and as freely tradable as the one for US Treasuries. An oil exporter with surpluses in the billions needs a place where it can invest them and sell them again at any time without a price loss.
2. Capital controls in China. The yuan is not freely convertible. Anyone who takes in a lot of yuan can mainly use them to buy in China.
3. Fixed exchange rates in the Gulf. Saudi Arabia, the Emirates, Qatar and others peg their currencies to the dollar. For that they need large dollar reserves.
4. Stablecoins spread the dollar. Of all places, the dollar is growing in the crypto market. The big stablecoins such as USDT and USDC are denominated in dollars and invest their reserves mostly in short-term US Treasury bills. The US GENIUS Act of 2025 requires such reserves for regulated stablecoins. This creates a new recycling cycle, similar to the petrodollar.

So the picture is mixed: the dollar is slowly losing weight but remains the centre of the system for the foreseeable future. The data show no overnight turnaround.

Where bitcoin could fit

As a neutral reserve

Bitcoin is nobody's debt. No state issues it, none can debase it, and if you hold it yourself, nobody can freeze it. This is exactly the property sought by the states that have been buying more gold since 2022. For them, bitcoin is a possible addition: verifiable, movable across borders in minutes and with a fixed maximum supply.

That is a role as a reserve asset, similar to gold.

For individual deals at the edge of the system

There are documented cases in which states allow bitcoin or other crypto assets for foreign trade. They all have one thing in common: the countries are cut off from the dollar system by sanctions.

• Iran reported in August 2022 a first official import order of about $10 million paid for with crypto assets.
• Russia has allowed crypto assets to be used experimentally for cross-border payments since a law passed in 2024.

Both are small amounts compared with the oil market. But they show what bitcoin is useful for there: as a way out when the normal route is blocked.

Energy into bitcoin

Another route runs not through oil invoices but through energy. Countries with power they cannot export turn it into bitcoin through mining. Bhutan does this with hydropower from the Himalayas through a state holding company, described in Bhutan: state bitcoin mining in the Himalayas. El Salvador mines with geothermal energy from a volcano. This is no substitute for oil deals, but it is a real way to turn energy into a globally tradable good without dollars in between.

Where bitcoin does not fit

As a currency for oil contracts

An oil deal takes weeks: contract, loading, voyage, delivery, payment. Both sides want to know what the price means in their own accounts. Bitcoin is too volatile for that today.

For comparison: the oil price fluctuates too, but oil and the dollar are both sides that traders know and can hedge with futures. Such hedges exist for bitcoin, but not with the depth that a market of just over 100 million barrels a day needs.

As a replacement for recycling

The petrodollar is also a savings system: exporters invest their surpluses at interest. Bitcoin pays no interest. A sovereign wealth fund could hold part in bitcoin, just as it holds part in gold. It will keep investing the bulk of its surpluses where there are returns and deep markets.

As an overnight replacement

All bitcoin together are worth about $1.44 trillion on 12.11.2026. Central banks' currency reserves alone stand at about $13.2 trillion. Even a big step towards bitcoin would be spread over years. Anyone betting on a sudden collapse of the dollar and a jump in bitcoin is betting on an event the data do not show.

What this means for you as a holder

For you in Germany, Austria or Switzerland, the petrodollar changes little about your own plan. Two points are still useful:

• The long-term direction favours scarce assets. States keep borrowing, and central banks look for reserves that do not depend on another state. That supports gold and bitcoin over decades, not weeks. The link with debt is explained in Government debt and bitcoin.
• Headlines are not a buy signal. The story of the expired agreement shows how quickly a false report raises expectations. If you buy regularly and hold for the long term, you don't need to react to such reports.