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The
price band of $65-70 per barrel and a long-lasting present
oil price boom has resulted in a windfall of petrodollars
for the Middle East. Also, the present oil price boom is witnessing
a big redistribution of wealth from oil consumers to producers.
Oil exports of the ten major oil exporting countries in the
Middle East could exceed $500 bn in 2006, which would leave
almost $200bn more. The surplus petrodollars are creating
enormous wealth in the Gulf region. Whether it is the Dubai
port deal that shook the West or the world's tallest building
in Dubai, are signs of Middle East's prospering oil economy.
Although, the booms in oil prices have not lasted long in
the past, this time the situation looks different as the surplus
petrodollars might prove to be more durable. The spending
of the Middle East petrodollars will help maintain the global
demand for goods and employment.
The
rising oil prices have been transforming the Middle East's
current account deficit to surplus. This is not the first
time that the gulf nations are witnessing a windfall of petrodollars.
The previous oil price booms in the 1970s and 1980s resulted
in current account surpluses. However, during that time, the
unprepared Middle East invested the petrodollars mostly in
the US treasuries and international banks, or lent to the
oil consuming countries of Latin America. The period after
oil price booms has, therefore, ended with inflation and a
slow economic growth worldwide. Sharif Ghalib, Senior Energy
Adviser/, Energy Intelligence Group, says, "The
surplus oil money earned during the `first oil price shock'
was initially placed overwhelmingly in the US and Euro dollar
money and capital marketsespecially in the US government paperand
was drawn down by the majority of OPEC countries to finance
all kinds of infrastructure (economic and social) and defense
needs." Contrastingly, as of now the present oil boom
has not created any noticeable negative impact as these economies
are spending the petrodollars wisely both at home and abroad.
With the piling up of the surplus petrodollars, the stock
markets in Saudi Arabia have risen fourfold since 2003. Besides,
public offerings have been oversubscribed 100 times and P/E
ratio in the region is over 40. |
