openpolitics.com

The petrodollar system entails that oil can be bought or sold only in dollars.
As a result, most countries need (a) to acquire dollars through trade with the US and (b) to keep reserves of dollars in order to meet their oil demand. The net effect is to create global demand for dollars which is anchored in global demand for oil.

Global demand for dollars creates upward pressure on their value which protects (to some significant extent) against losses in purchasing power associated with inflation. This allows the US to pursue policies which might otherwise erode the value of the dollar and accrue large debts without foreign creditors losing confidence in the value of the repayments.

Countries which have attempted to leave the petrodollar system by trading oil in other currencies (Iraq and Libya) have shortly afterward been targeted by the US in military interventions. Some commentators have posited a connection, arguing that the real goals of US foreign policy are to protect the petrodollar system rather than to locate WMDs or fight terrorism. Whether or not this view can be substantiated, it is probably true to say that the collapse of the petrodollar system would be very damaging to the US economy.

Inflation would increase substantially, increasing the cost of business and the cost of living. Foreign countries may no longer be willing to accept dollars in exchange for their exports to the US. This would adversely affect import-based industries. Additionally, foreign creditors may lose confidence – impairing the ability of the US to roll over or its national debt. This could lead to a default, an inability of the government to meet social security obligations and possible civil unrest. In order to offset these effects the US may try, as has been said already, to become more self-sufficient and less dependent on foreign imports. This could be achieved through reversing the balance of trade; shifting from an import-based consumer economy to an export-based manufacturing economy. However, kickstarting a manufacturing base within the US may be difficult as this requires investment and with dollars losing purchasing power, there would be little capital available to invest.

Just my two cents (no pun intended)