pet·​ro·​dol·​lar | \ ˈpe-trō-ˌdä-lər How to pronounce petrodollar (audio) \

Definition of petrodollar

: a dollar's worth of foreign exchange obtained by a petroleum-exporting country through sales abroad usually used in plural

Examples of petrodollar in a Sentence

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The plan, launched as a dip in oil prices made Saudi Arabia's economic future look precarious, calls for Saudi Arabia to diversify its economy away from energy and cut the economic flab accumulated after living for decades on a diet of petrodollars. Adam Taylor, Washington Post, "Who is behind the wheel in a changing Saudi Arabia?," 22 June 2018 Nigeria is awash with petrodollars but much of this money does not trickle down to the average man and woman on the street. Joey Akan, CNN, "From Chibok Girls to Yahoo Boys, 'This is Nigeria' video is a mirror for the country," 28 May 2018 Oil was fetching $100 a barrel, and Mr. Maduro’s populist government was showering petrodollars on everyone. Anatoly Kurmanaev, WSJ, "The Tragedy of Venezuela," 24 May 2018 Here come petrodollars, back to save global asset prices., "Five Things You Need to Know to Start Your Day," 25 Apr. 2018 Once buoyed by Venezuelan petrodollars, Nicaragua can no longer count on that lifeline as Venezuela’s economy has collapsed. Joshua Partlow, Washington Post, "‘The people lost their fear’: How Nicaragua’s new revolution took shape," 26 Apr. 2018 Oil's surge to the highest level in more than three years will in fact spur fuel demand as swelling reserves of Middle East petrodollars are reinvested overseas and stimulate the global economy, Goldman's head of commodities research said. Grant Smith And Tracy Alloway, Houston Chronicle, "Goldman echoes Saudi view that higher prices won't hurt demand," 23 Apr. 2018 Dubai’s strategy has been to grow beyond a reliance on petrodollars., "A City Reaching for the Sky, Without the Help of Oil," 16 Apr. 2018 So long as China quarantines its financial system from the rest of the world, talk of a petroyuan replacing the petrodollar will be premature. The Economist, "China wants to reshape the global oil market," 28 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'petrodollar.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of petrodollar

1973, in the meaning defined above

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Last Updated

6 Feb 2019

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The first known use of petrodollar was in 1973

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Financial Definition of petrodollar

What It Is

Petrodollars are cash -- usually U.S. currency -- derived from the sale of oil and deposited by oil exporters into Western (usually American) banks.

How It Works

Let's assume that country XYZ sold US$40 billion of oil in 2008. The money that country XYZ deposits into an American bank is called petrodollars. Country XYZ does this in order to earn the highest return possible on the money and perhaps later use it to fund infrastructure projects, combat budget imbalances, or other governmental initiatives.

A December 2006 study published by the Federal Reserve Bank of New York found that oil exporters use about half of their petrodollars to import goods and services (particularly from Europe and China), while they invest the other half in foreign assets (particularly in the United States). This is important because when oil prices are up, imports to the oil exporting countries go up, which stimulates the economies of the countries the oil exporters are buying from. Likewise, when oil prices are up, the oil exporters make more foreign investments, which tend to drive up prices of securities in the markets in which they invest. However, the reverse is also true. When oil prices are down, fewer petrodollars flow to foreign countries.

Why It Matters

Petrodollars are a good example of how one country's economic prospects affect other countries. For instance, countries that rely on petrodollars for economic stability can experience windfall gains when the price of oil increases. Likewise, they are hard hit by decreases in oil prices, which often causes foreign investors to flee the market and can ultimately prompt these countries to diversify.

[InvestingAnswers Feature: 3 Profitable Ideas to Offset the Rising Price of Gas]

Source: Investing Answers

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to boil down or concentrate

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