The Petroyuan’s Challenge to Dollar Hegemony

The launch of yuan-denominated crude oil futures in 2018 marks a significant step in the renminbi’s internationalisation, offering an alternative to the US dollar in the global energy trade. The historical context of the petrodollar system, established through an agreement between the United States and Saudi Arabia in the mid-1970s, further entrenched and sustained the US dollar’s status as the global reserve currency following the collapse of the Bretton Woods system. The emergence of the petroyuan reflects China’s ambition to challenge the long-standing dominance of the petrodollar, underscoring the shift towards a more multipolar world. While the petroyuan is unlikely to displace the dollar, its introduction reflects broader geopolitical and economic reconfigurations, potentially adding complexity and friction to global financial and energy transactions.