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There is an abundance of conspiracy theories online that the USD is propped up in part by the fact that oil is traded in USD, and that countries which think about allowing trades in a different currency like Saddam's Iraq are promptly snuffed out by the US military. In fact, I'd go on to say that this is the widely-held belief in west Asian countries.

I've been trying to find the truth for sometime but it seems that experts themselves seem to contradict each other. A reddit user explains the difference between 'traded in' and 'settled in' and a fellow at the Adam Smith Institute writes on Forbes essentially saying "no effect really". On the flip side, you have an MI-6 agent writing for HuffPo that the USD is a weapon against Russia because oil is priced in dollars, and this quora user who says that the impact on USD rates could be as high as 1-2%.

So my questions are:

  1. Does the fact that oil is priced in USD have a tangible impact on the world, or is settlement freely in any currency as the reddit user explains?

  2. If so, what would be the effect of countries pricing oil in another currency?

  3. If not, what is a 'petro dollar' (as petrol can be settled in another currency), and how did this conspiracy theory come about?

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