You should care because the dollar’s status as a reserve currency is a huge benefit to the US economy.
Consider: whenever anyone in Europe wants to buy oil, they are effectively selling Euro to buy Dollar with which to buy the oil. That is a constant flow of value from the Euro to the Dollar. (and the same goes for almost every currency in the world).

If that flow were to be interrupted, by European companies and countries buying oil in Euro, that would adversely affect the exchange rate between those two currencies. The value of the dollar would fall relative to the Euro. (and again, the same goes for any other currency that can bypass the exchange to dollar to buy oil).
As the value of the dollar falls the cost of all imports rises, the trade deficit worsens, and the US economy as a whole suffers.

And now Drudge has a report that Kuwait might drop the dollar with the rest of the gulf states. I guess war is on with Kuwait then?

But go ahead and keep predicting a war with Iran every few months. Maybe someday you’ll be right.

I have no doubt Iran will do anything it can to mess with the U.S. There is no love lost between our governments. Especially since he’s the same age as the students that took over the Embassy. Can you imagine that happening today???

Some years ago I used to work at the Trade Department of a Bank dealing with Documentary Credits for the purchase of oil (my dept. was dealing with Russian oil but the way oil trading works applies to Iran oil as well).

When a European firm wants to buy oil, it contracts at the current world markets price which is expressed in USD. Then, to cover itself against exchange risk exposure, it takes out a foreign exchange contract or option. Basically it agrees now, what price it will pay in Euro for a set amount of USD at a future date. (Other options such as swaps exists but are too complex to analyze here).

If they can agree the purchase of oil in Euro directly with the seller, then (a) they save the exchange commissions and (b) the save the forward contract/option fees. Furthermore, they have no exposure to any adverse foreign exchange movements.

Basically this means that oil will be slightly cheaper for European oil trading companies (although I doubt that the savings will truly reach the consumers).

Trading oil is a very complex procedure. Oil may be loaded in a tanker bound for Europe, but the ownership of the oil might change multiple times (10-12 is not uncommon) during the voyage.

USA does not buy oil from Iran and very little of the Arab oil reaches the US. USA buys oil from countries like Nigeria and Canada which have an advantage in transport costs.

Arab oil is mainly exported to Europe and Asia (think China and Japan).

What matters is that the price of oil is set globally; if the price of Arab oil gets higher, Nigeria and Canada will increase their price in step with the global market.

If a domino effect takes place and more countries demand Euros in exchange for oil, this will spell trouble for the US economy.

At the same time this is not so good for the European economy; it will lead to the Euro becoming a harder currency, which will create additional inflationary pressures.

Control of inflation and price stability is the main purpose of the European Central Bank; I doubt if AT THIS MOMENT, with the USD trading so low, they would welcome the switching of the oil trading from USD to EUR. If USD was trading higher I do not doubt that they would welcome such a move.

We’ve got problems.

http://tinyurl.com/37txmd

Then i found this one:

http://youtube.com/watch?v=gAcxGD6-c-E

There is talk in OPEC of replacing the petro-dollar with the petro-euro.

This is a really big deal and nobody I know seems to care.