Author(s)

Berk Cem^*

Department of Accounting and Information Systems, Istanbul Arel University, Istanbul, Turkey.

Historically most of the oil trade has been made with US Dollars. This has important practical implications. For example, US Dollar is always a reserve currency since it has to be obtained to trade oil. There were previous attempts to trade in Euros such as Iraq however recently there is more support from resource countries such as Russia, China and Iran. A dedollarization campaign against petrodollar has already been started. This can be done by exporting oil, gas and gold with currencies other than US Dollar, such as Ruble, Yuan or Rial or most importantly an international reserve currency which could be Euros as a strong alternative to US Dollar. This is possible due to monetary policy practice of European Central Bank and support from European Union. This increases the value of Euro, decreases interest rates and helps European economy with increased interest on European assets. This paper investigates Brent and WTI for the changes in the value of major currencies. Brent is traditionally a European oil index, and oil is produced in North Sea whereas, WTI (West Texas Intermediate) is a Texas based US oil index. Both indices are used as international benchmarks of oil. The data for this research is daily between February 2011 and September 2014. The WTI and Brent are represented by variables from NYSE exchange traded funds namely Teucrium WTI Crude Oil ETF (WTI), and United States Brent Oil ETF(BRENT). The currencies analyzed for the study are EUR/USD, USD/CHF, USD/JPY, USD/RUB, USD/SAR and USD/ ZAR. The analysis includes unit root tests, vector autoregression (VAR), vector error correction model (VECM), cointegration and Granger Causality. Finally European Energy Policy implications, and opportunities and challenges of oil trade in Euros are discussed.

De-Dollarization, Oil Exports, Euro Trading, Energy Policy, European Monetary Policy

Cem, B. (2015) De-Dollarization and European Energy Policy: Testing Brent and WTI. Open Journal of Social Sciences, 3, 72-87. doi: 10.4236/jss.2015.38008.