From Raj Patel and Jason W. Moore’s A History of the World in Seven Cheap Things loc 2651-2699:
When the United States abandoned the gold standard in August 1971,80 international capital sought refuge from this “Nixon shock” in commodity purchases. At the same time, the Soviet Union—following poor harvests—traded its oil for wheat, driving up the price of bread. Fourteen months later, the Organization of the Petroleum Exporting Countries (OPEC), nominally responding to the Yom Kippur War between Israel and Egypt, announced a 70 percent rise in the oil production tax. 81 World oil prices leaped from three to twelve dollars per barrel. The OPEC countries were responding to the US export of dollar-denominated inflation. As the shah of Iran put it, the United States had “increased the price of wheat you sell us by 300 percent, and the same for sugar and cement.” 82 The world paid the higher oil price, and the OPEC countries found themselves sitting on substantial income, reserves of what became known as petrodollars. These reserves needed a return, so they were cycled back to oil-importing countries as low-interest loans. Think of this as money backed not with silver but with oil—a “de facto oil standard.” 83 The so-called Volcker shock of 1979 tripled the real interest rates on these petroloans over the next two years. 84 To avoid default, indebted countries, predominantly in the Global South, turned to the only lenders who’d consider them: the International Monetary Fund and the World Bank, institutions that could administer austerity programs, small governments, and free markets through their own shock doctrines. 85 Petrodollars thus made possible the sorry history of neoliberal governance.