Posted on 01/31/2007 5:42:31 AM PST by shrinkermd
The petrodollar pipeline that recycles billions from oil producers back to the U.S. economy has turned crude-laden nations from Norway to Iran into the world’s biggest sources of global savings. These nations are also key sources of foreign demand for U.S. assets.
Now new research predicts a trend that could affect the U.S. economy nearly as much as swings on crude exchanges: Oil producers might be looking to diversify how they spend and invest their cash.
Such changes are worth watching — mainly because the flood of money generated for oil exporters by sustained high crude prices has become a major pillar of support for the U.S. economy.
Over the last two years, oil exporting nations passed Asian central banks as the biggest source of savings in the world, adding an estimated $500 billion to their coffers in 2006 alone.
The recent drop in oil prices may force exporters to cede the top spot. Still, it’s clear that their investments in U.S. debt let America continue to fund its huge trade deficit and make up for its lack of savings. The deficit itself is due in no small measure to oil imports.
So keeping track of petrodollar flows is important. But it’s not easy.
Bond house Pimco estimated that only about 40% of petrodollar savings during the past four years can be accounted for by recorded asset purchases. The other 60% — almost $700 billion — can’t be iden- tified via data tracking asset purchases. Billions of petrodollars flow freely and unchecked through London and the Caribbean.
(Excerpt) Read more at epaper.investors.com ...
Strategic issues bump.
Because we want to use up theirs first.
Or they may not.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.