The petrodollar isn’t collapsing — but its dominance is being tested. Increasingly, BRICS countries and parts of Europe are settling energy and bilateral trade in local and alternative currencies, eroding the near-universal reliance on the US dollar for oil payments.
What the data shows
- Investment adviser Sowell Management finds about 80% of oil trades are still settled in US dollars, while roughly 20% are now paid in local currencies.
- That 20% is notable: analysts say it could climb toward 25–30% over time, driven by geopolitical shifts and new trade arrangements.
- The BRICS coalition — which accounts for nearly 40% of global oil production — is a central force behind this trend.
Who’s leading the shift
- China is actively promoting a “petro-yuan,” nudging energy suppliers and buyers to settle contracts in yuan. A handful of oil, coal, and copper purchases have already been settled in Chinese currency.
- India and Russia have also diversified away from the dollar. India has paid for some oil in yuan, rubles, and even its own rupee, and has used the UAE dirham in certain deals. Russia remains a vocal proponent of moving away from the petrodollar in bilateral trade.
Why it matters
- At present the dollar retains its dominant role in global oil settlement, but the rise of regional payment arrangements and alternative currency use represents a structural pressure point on US monetary hegemony.
- For markets and the crypto sector, the trend highlights growing interest in alternative settlement systems — from local currencies and bilateral clearing mechanisms to digital currencies and tokenized assets — that could be leveraged to reduce dollar exposure.
Bottom line
The petrodollar remains the baseline for most oil trade, but BRICS-driven substitutions and broader geopolitical realignments are creating a credible path for meaningful change. What starts small today — 20% of oil trades in local currencies — could become a larger slice of the market if current momentum continues. Crypto and digital-payments observers should watch how trade currencies, CBDC experiments, and cross-border settlement rails evolve as traditional dollar dominance faces new strategic competition.
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