Ending dollar oil sales easy; pricing is hard

A report on Tuesday in the Independent newspaper revived the idea of ending a huge volume of trade of the world's most liquid commodity -- oil -- in the U.S. dollar, a potentially major sign of the greenback's fading status. Quoting unnamed sources, including Gulf Arab and Chinese banking sources, the paper reported that Gulf Arab states were in secret talks with Russia, China, Japan and France "to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf."

That appeared to suggest the easier of two ways to break the oil/dollar link: ending the use of the dollar as the currency used to settle oil trades between countries or between companies, an important function but essentially a treasury operation, one that Iran, for instance, has already undertaken.

The much more difficult task would be to replace the currency in which oil is priced: the U.S. dollar, the currency that underpins benchmarks from New York to Dubai to Singapore, and which would require a massive effort to change.