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ANDREA SEABROOK, host:

Two inescapable economic facts of life in New York and around the world are the soaring cost of oil and the plunging value of the U.S. dollar.

Yesterday, oil closed at a record $98 a barrel and the Euro was worth almost a dollar and a half. At last week's OPEC summit in Saudi Arabia, the stridently anti-American president of Venezuela, Hugo Chavez, said the decline of the dollar showed the U.S. empire is coming down.

To find out more about this and what it really means for oil producers and consumers like us, we invited in Daniel Yergin, chairman of Cambridge Energy Research Associates. He was at last week's OPEC summit and says countries like Venezuela and Iran were very eager to switch to any currency other than the dollar, and not just because they don't like the United States.

Dr. DANIEL YERGIN (Chairman, Cambridge Energy Research Associates): The basic reason is that these countries get paid in dollars, but the goods they buy if they come from Japan or if they come from Europe are priced in other currencies which have appreciated in value. So that means, basically, the goods cost them more than they did before because of the weakness of the dollar.

SEABROOK: Because they are holding their earnings in dollars.

Dr. YERGIN: Right. So that's the one reason, and then the second reason is they built up tremendous amounts of dollars in their bank accounts - we're talking about trillions of dollars - and as the value of the dollar goes down, well, the value of their bank accounts, compared to other currencies, also goes down. So that's also what's weighing on their minds.

SEABROOK: So would they like to get paid on Euros now or would they just keep their sort of wealth in crude oil?

Dr. YERGIN: There's no unified view here. If you're in Venezuela or you're in Iran, then you certainly would like to be paid in something else. And, indeed, Iran is seeking to price its oil in Euros, but it all gets translated back into dollars. But for the other oil exporters, the countries, like Saudi Arabia, that have a ongoing relationship with the United States, it would be, not only an economic decision, but also a political decision to leave the dollar when the U.S. is so involved in protecting their security. It would be a pretty negative message, so they're not going to do that.

And also, the other thing that's on their minds is, in fact, they're holding lots of dollars. So if they march away from the dollar, then that becomes another message for dollar to go down and the result - their remaining holdings go down in value.

But it was a pretty fierce debate and it's going to continue to be a pretty fierce debate as we're in this phase of a weak dollar.

SEABROOK: The soaring demand for oil all over the world has made producers of oil much richer, as you say, and some of these nations aren't exactly - haven't been powerful in the past, but now they're holding all these dollars. We're talking Russia and Venezuela, and they're just holding these huge amounts of dollars. What…

Dr. YERGEN: Yes. What's happened is it's only an economic shift, but it's a political shift in power that's going on. Just look at the OPEC nations as a group. In 2002, not that long ago, their entire oil revenues were a hundred and ninety-nine billion dollars. This year, they'll be close to $700 billion, so those dollars are piling up.

Look at Russia. Nine years ago, Russia was a bankrupt country. Today, Russia holds something like $440 billion of foreign reserves, and on top of that it has $180 billion in its so-called oil stabilization fund. So when you see Russia's new assertiveness on the world stage, it's pretty closely connected to the inflow of revenues of oil and also natural gas.

SEABROOK: Mm-hmm. What does all of this mean for the American economy then?

Dr. YERGEN: For the U.S. economy, this reflects a questioning about the role of the U.S. in the world economy. Clearly, the U.S. is, by far, the strongest, biggest economy in the world, but you now have the E.U. that rivals it. And the weakness of the dollar is tied into what's going to happen right now to the U.S. economy. And this rise in oil prices that we've seen is very recent, it only started in the August-September period. Up until then, the oil price was bumping along at sort of $70 a barrel.

And then the subprime crisis started to unfold, talk of interest rates and then actual interest rates, and, suddenly, the oil prices took off like a rocket because, in a sense, what you have is people investing in oil as a hedge against a weakening dollar.

SEABROOK: Mr. Yergen, thank you very much for speaking with us.

Daniel Yergen is chairman of the Cambridge Energy Research Associates. He also is Pulitzer Prize winner for the - his book, "The Prize: The Epic Quest for Oil, Money and Power." Thank you very much, sir.

Dr. YERGEN: Thank you.

SEABROOK: Here's a case in point to the falling dollar. In his new music video, rapper Jay-Z flashes his bling and a wad of Euros.

(Soundbite of song, "Blue Magic")

JAY-Z (Rapper): (Singing) And I'm gettin' it. I'm gettin' it. I ain't talking about it. I'm livin' it. I'm gettin' it, straight gettin' it. Get, get, get…

SEABROOK: It's ALL THINGS CONSIDERED.

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