Reply #18: Some oil money is up to no good [View All]

[54anickel]

Well that certainly depends on one's perspective!

http://www.usatoday.com/money/industries/energy/2005-08-23-windfall-usat_x.htm

In case $3-per-gallon gas isn't depressing enough, consider what your gas money pays for: A bull market in Saudi stocks. Handouts for Fidel Castro. And weapons for anti-American terrorists.
Oil-producing states haven't seen a windfall like this since the twin price shocks of the 1970s. Persian Gulf countries this year will earn about $291 billion in oil revenue vs. $61 billion in 1998, when oil prices tanked, according to the Institute of International Finance (IIF). For every $1 increase in the price of a barrel of oil, Venezuela, the No. 4 source of U.S. imports, reaps almost an additional $1 billion a year.

In several oil-producing countries, soaring oil prices are complicating U.S. foreign policy or blunting commercial opportunities for American companies. Irans' mullahs, locked in a standoff with the U.S. over Tehran's nuclear ambitions, are bolstered by an oil-rich economy that the International Monetary Fund says will grow 6% this year and next.

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That's a significant sum, but it is being divided among a greater number of destinations than during previous booms. In the 1970s, most foreign investment by gulf states ended up in U.S. markets, which dominated global investing even more than today. Then-secretary of State Henry Kissinger encouraged Saudi investment so that the most influential member of OPEC would be discouraged from damaging the U.S. economy with future oil embargoes, says Rachel Bronson, director of Middle East studies for the Council on Foreign Relations.

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At home, Chavez has lavished oil money on his constituents in Venezuela's poorest neighborhoods. Through "Mission Mercal," a network of government-run groceries, Chavez provides half-priced food to more than 10 million people.

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Big oil producers should have learned one lesson from earlier booms: High prices don't last forever. Oil prices now are around $65 per barrel. But with greater production expected from non-OPEC producers such as Angola, Brazil and Azerbaijan, prices will drop to around $40 per barrel in 2007-08, says Jim Burkhart, director of oil market analysis for Cambridge Energy Research Associates.

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