Under the dollar gold standard, the credit basis of the dollar is that anyone who holds the dollar can exchange the equivalent gold. The U.S. government has unlimited compensation obligations to dollar holders. Under the oil standard of the dollar, the credit basis of the dollar is that anyone who holds the dollar can use it to buy oil. This system requires the United States to have a strong military deterrent to ensure that oil-producing countries cannot price and settle oil trade in currencies other than the US dollar. At the same time, it also ensures that oil-consuming countries must reserve a large amount of dollars to buy oil through military deterrence. The United States provides dollars and military deterrence. Oil-producing countries are responsible for producing oil. Oil-consuming countries are responsible for storing dollars to buy oil. Oil-producing countries have accumulated a large surplus because of oil trade, and then flow back to the United States to balance the trade deficit of the United States. At the same time, oil-consuming countries will also flow back to the United States because of their large dollar surplus to balance the US trade deficit. This forms a cycle of petrodollars.

From a purely monetary point of view, why can oil replace gold? According to China's traditional monetary system and financial culture, gold can become the king of money because things are scarce and gold is too rare, so gold is a natural currency. But is oil scarce? Not rare. The so-called oil has been used up for decades, which is all hype.

What is the monetary logic of oil standard replacing gold standard? The answer is American military deterrence. Control oil-producing countries by force, control oil trade channels by force, and close ports and fortresses. Although oil is not scarce, it is indispensable and irreplaceable as an industrial energy source. This is the logic of dollar oil standard.