Who gets what from Middle East oil Essay Example | Topics and Well Written Essays - 500 words

Who gets what from Middle East oil - Essay Example Another factor affecting Middle East is petrodollar recycling. Over the years, oil prices have been going up creating a lot of revenue for OPEC countries. The importing countries such as the US, UK, China and Japan pay heavy prices for oil to fuel their economies. However, as Higgins, Klitgaard, and Lerman note, much of this revenue by Middle East countries returns to the importing countries in terms of purchases of goods and services as well as foreign assets. The high oil price paid by importers slows economic growth but the purchase of goods by exporters from importers offsets this negative growth by improving consumption and investment. Countries like the US benefit from sale of foreign assets to the exporters to finance their current account deficits. Most of the sales to exporters come from European countries due to their proximity, and less from the US. The petrodollars are also used to finance investment projects in OPEC countries. For example, Saudi Arabia engaged in a giant construction program called Petro Rabigh, which is a joint venture of the state-run oil corporation Saudi Aramco and Sumitomo Chemical of Japan. This $ 1500 billion project produces plastic and other materials for sale in and outside Saudi Arabia. Saudi Aramco ranks first among oil companies worldwide in terms of crude oil production and exports. Besides investment, revenues are also used to bail out banks facing financial crisis such as Citigroup, Merrill Lynch and Morgan Stanley. They are also used to develop infrastructure.