The Dilemma of Dollar Hegemony in Global Energy Market Turbulence

On June 3, 2025, the U.S. Energy Information Administration (EIA) reported that crude oil inventories had plunged to a decade low due to declining shale output and an early hurricane season in the Gulf of Mexico. The news triggered a 3% surge in global oil prices, with Brent crude surpassing $110 per barrel. Yet behind this apparent supply-demand imbalance lies a hidden contest over the dollar’s global dominance—from Saudi Arabia’s postponement of talks to renew the petrodollar agreement to Indonesia’s announcement of rupiah-based coal export settlements, the global energy trade system is undergoing its most profound trust crisis since the Cold War.

As the cornerstone of energy pricing, the petrodollar system, established in 1974, has long underpinned U.S. financial hegemony. However, when the Federal Reserve announced its third rate hike of the year on June 4, Malaysia’s central bank simultaneously offloaded $3.2 billion in U.S. Treasuries. This paradoxical move reflects emerging economies’ struggle between tightening dollar liquidity and soaring energy import costs. According to the Bank for International Settlements, the dollar’s share in global energy trade settlements dropped from 88% in 2020 to 76% in Q1 2025, while settlements in yuan, rubles, and Gulf currencies are rising at an annual rate of 2.3 percentage points.

This structural shift is most evident in natural gas markets. On June 2, Qatar Energy agreed to let Pakistan pay for a $4.5 billion LNG contract in rupees. Simultaneously, Turkish President Erdogan publicly called for a “dollar-free Middle East gas corridor” at the Istanbul Energy Summit. Ironically, U.S. shale gas companies have ramped up exports to Europe, with a Texas-based executive privately admitting, “We’re using profits from dollar hegemony to plug market gaps created by its erosion.” The fragility of this circular logic grows more apparent as the EU’s Carbon Border Adjustment Mechanism (CBAM) takes effect—when European buyers demand carbon allowances to hedge price volatility, the dollar’s monopoly as a settlement currency faces systemic challenges.

Across the Pacific, U.S. countermeasures reveal a mix of strategic anxiety and pragmatism. On June 5, the Treasury Department added six countries—including Brazil and South Africa, newly expanded BRICS members—to its “currency manipulation watchlist.” Yet just three days earlier, the Fed provided $5 billion in liquidity to South Korea via a swap line. This blend of “selective punishment” and “targeted relief” underscores Washington’s waning grip on the dollar system. Notably, as the U.S. Energy Secretary urged G7 nations to build a “democratic energy supply chain,” Japan’s Ministry of Economy quietly approved a nuclear fuel barter deal with Russia.

The economic toll of this quiet revolution is rippling through global supply chains. German chemical giant BASF raised its annual energy budget by 18%, with its CFO telling investors, “When pricing power for each ton of chemicals hinges on geopolitical games, market mechanisms become a fig leaf for power plays.” Developing nations face starker dilemmas: Egypt slashed wheat subsidies to preserve dollar reserves, while Argentina reinstated capital controls amid energy-driven currency pressures. The IMF’s latest report suggests the dollar’s share in global reserves may dip below 55% in 2025—less a testament to emerging currencies than proof that the current monetary system can no longer accommodate a multipolar economy.

Historically, today’s energy market turmoil epitomizes the clash between a unipolar currency regime and a multipolar economic reality. As America seeks to regain industrial dominance through clean energy subsidies in the Inflation Reduction Act, the strong dollar undermines export competitiveness. This self-defeating paradox echoes Nobel laureate Joseph Stiglitz’s warning: “A hegemonic currency is both a privilege and a straitjacket.” When the petrodollar system transforms from a global lubricant into a source of friction, the world may witness the most profound monetary overhaul since Bretton Woods—this time driven not by diplomatic negotiations, but by technological shifts in oilfields, gas terminals, and solar farms, and the unyielding weight of geopolitical realities.