Power Flows to The Oil States; Since 2002, oil exports have seen revenues more than double, and surpluses quadruple, while the accounts of importers deteriorate.

Byline: Norbert Walker (WALTER is the chief economist at Deutsche Bank.)

One dramatic but largely overlooked change in the global balance of economic power is the shift of wealth toward countries that supply energy and raw materials. Most notably, the major global oil exporters saw their oil revenues rise from less than $300 billion in 2002 to almost $700 billion in 2005. That resulted in a quadrupling of their current account surplus (which

includes financial transactions as well as trade in goods and services) to about $400 billion. In turn, the external accounts of the United States and other oil-importing countries have deteriorated, intensifying global economic imbalances and dampening growth in energy-importing countries.

The specific global and national impacts will depend on how the oil windfall is either saved or spent. And as the outlook on prices shifts--with more and more analysts predicting that prices will stay high for the foreseeable future--oil-producing nations are becoming increasingly willing to invest longer term and to spend. That's largely good news for the oil importers. Even more than in previous oil-price shocks, the fallout in oil-importing countries has been significantly reduced by the recycling of petrodollars. OPEC, Russia and other oil exporters, including smaller nations of Latin America and Africa, are buying more luxury goods and modern factory equipment from Europe and especially Germany, as well as more Treasury bonds from the United States, helping to keep U.S. interest rates down.

But the petrodollar boom has more worrisome implications, too. Until recently, the exorbitantly high levels of U.S. consumption have been financed largely by wonderfully reliable purchases of U.S. Treasuries by Asian central banks, particularly those of Japan and China. However, since 2004 oil-exporting countries seem to have funded a rising proportion of the U.S. current account deficit, making the United States ever more dependent on financing from relatively unstable regions. It's hard to track the moves of some oil states, which put their petrodollars in nontransparent special funds. But Russia alone has increased its foreign reserves by $150 billion, mostly in the form of U.S. Treasury bonds, which appear to remain the investment of choice for oil states.

Treasuries have been preferred so far because they are highly liquid, which is to say they can be sold very quickly without a dramatic impact on prices. But concern ...