In dinarland we often hear gurus talking about the vast wealth of Iraq as the reason we can expect an unprecedented revaluation of their currency. Iraq has a reported 143 billion barrels of proven recoverable oil in their reserves, which would amount to over $7 trillion dollars worth of oil. While that’s an impressive amount, I think we need to put it in context. You see, their neighbor to the east – Iran – has 158 billion barrels in their reserves. Canada has 170 billion barrels in their reserves. Saudi Arabia has 266 billion barrels in theirs, and Venezuela leads the world with over 300 billion in theirs.
Now, let’s take a look at their currencies.
The Iranian rial is valued at $.00003, down from $.000033 in 2015 and $.00004 in 2013, despite all of the hype generated by dinar/dong/Zim/rial pumpers in recent years. Okay, maybe their reputation as a renegade radical Islamic state has kept the rial’s value down, so let’s look at the others.
Canada’s dollar (the loonie) is currently valued at $.79, up from $.76 two years ago but down from about $.96 four years ago.
The Saudi riyal is valued at $.266, just like it was two years ago and just like it was four years ago, because it’s a pegged currency on a managed float just like the IQD.
And then there’s the Venezuelan bolivar, currently valued at $.10 after the country has fallen into an economic crisis. Four years ago the bolivar’s value was $.16 and five years ago it was at $.23.
So we can see from these numbers that oil reserves don’t determine the wealth of a country or the value of its currency. Why would the US, with only 35 billion barrels in their reserves, have a higher standard of living and a more valuable currency than the others? Because the country has a diverse economy, an educated populace, a strong military, a stable government, and an arrangement with almost every oil producing nation to sell their oil for USD. Many countries use the dollar along with their currency, or they use the dollar exclusively and don’t even have a currency of their own. Countries want US products and US services, and they need US dollars to get them. When Iraq has all of the qualities with its economy that the US has with its, maybe their currency will have a value near that of the USD. Maybe by the end of the century that will happen, but by that time the IQD and the people who own it will be long gone.