An Investigation into the Hegemony of the US Dollar in Recent Years as Threats of a Proposed BRICS Currency Persist

The US dollar (USD) has been the world’s leading reserve currency since the 1944 Bretton Woods Conference, which has historically benefited the United States both economically and politically. Notably, the USD plays an integral role in the international trade of crude oil. Countries even pay for oil in what has come to be known as the “petrodollar.” Nonetheless, during the last quarter of 2022, USD reserves held by worldwide governments fell to a two-decade low due to Russia’s USD reserves being frozen after it invaded Ukraine. For this reason, China stepped in and became the intermediary, allowing Chinese Yuan to replace USD in bilateral trade between China and Russia. After that, China and Russia, the two major economies from “BRICS” (Brazil, Russia, India, China, and South Africa), have profoundly affected the shares of USD in international reserves. In this study, I intend to examine the linkage between global trade flows of crude oil and shares of USD in international reserves. Looking into the historical data from the International Monetary Fund and United Nation, I find a significant relationship between the shares of USD reserves and oil trade. Since 2017, the United States has reduced oil trade with OPEC (Organization of the Petroleum Exporting Countries) nations, which now trade more with BRICS; at the same time, the USD’s share in international reserves continuously declines.