Pricing Crude Oil in "Gulfos"? In Their Dreams

A bloc of oil producing countries led by Saudi Arabia, Kuwait and others (not OPEC; for some reason they left out Dubai) reported preliminary steps to establish a regional currency: The

This is a region of the world strife with tribal mistrust, border skirmishes, oil production quota breaking, and no institutionalized or constitutional outline for common defense. As the mess in Dubai shows, the region lacks a vibrant economic base and depth to support a common currency. The countries in question lack even the framework for regional trade agreements. Even if a move towards regional defense and cooperation did emerge, it would present more of a national security problem (for the U.S.) than an economic one.

And what would support a common Arab currency — oil? If so, how would the reserves be audited, or would they? If the world dips deeper into recession and the demand for oil slides, how would the Gulfo be supported then? Would there be intervention in more Gulfos, or perhaps dollars or euros? Too many potential problems, and the world is unwilling and unprepared to adopt a new currency when the trade-weighted balance of payments in question is in the trillions. Plus, there are some who would argue we are already at or beyond peak oil production in the Middle East, suggesting that we are already beyond “peak Gulfo.” That