RIYADH, Oct 22: Since the ‘Oil Shock’ of the 70s, things have changed, and changed drastically in many respects. Though it may not be a win-win situation yet, but indeed one thing is certain. It is no more a win-some, lose-some scenario too, if the globe could be classified into two distinct categories, the crude producers’ and the oil consumers. The rising oil prices may have been regarded as a curse by many yet the fact remains that the extra petro-dollars in the coffers of the oil producers’ are acting today as a major stabilizing force in the global financial markets and held responsible to some extent for sustaining the global economic growth.

Global economies are so well integrated and entrenched into each other, that even the sustained higher than normal oil prices have not proven to be as traumatic for the industrialized, oil consuming world that as some had initially felt. Additional petro-dollars of the oil producing countries are trickling back into the industrialized economies in the form of investments. This in itself is helping the industrialized states, especially the United States keep its house in order as far as the financial management is concerned.

Things have changed drastically. Both the producers’ and the consumers’ have learned their lessons and are sticking to those.

The oil producers are now also aware of the fact that oil business is cyclical in nature. If it is riding a crest today, despite all what the pundits are saying about an impending global oil crisis, it may also be passing through a trough at some point in future.

Consequently governments in the Middle East and Central Asia are spending today only an average of about 36 per cent of their additional revenues –- compared with nearly 90 per cent in the 1970s and more than 60 per cent in the 1980s. This is despite the fact that most of the Gulf oil producers are faced with the rising expectation of a soaring population.

This picture is quite different from the earlier oil boom periods. Then oil producing nation spent much of their gains rather than investing them for the sake of future. “It’s a real turnaround from the 1970s,” when the IMF was warning oil producers about spending too much, says Mohsin Khan, the head of the IMF’s Middle East and Central Asian Department.

Today oil producers are spending far less. Overall spending has been so restrained in some of the oil producing countries that the IMF recently found itself in the enviable position of encouraging the oil producers to spend more on projects.

The Saudi central bank’s assets nearly doubled to $109.5 billion in May this year, when compared with $59.5 billion at the end of 2003. Saudi holdings of foreign securities also jumped to $63.5 billion from $29.5 billion over the same period.

In most cases the governments of the oil producers’ were seen investing the extra cash largely in assets held in the US and Europe. A significant portion of this money was seen pouring into the major global financial markets and this is enabling the US to continue spending, fuelling the wheel of the capitalist economy.

This has helped the US and the European markets keep interest rates low and asset prices high, analysts underline. According to the International Monetary Fund, major oil producers are now a bigger source of funds for the world than China, Japan and the rest of Asia, which has been the dominant saver –- as yet.

Oil producing countries in the Middle East owned $121 billion in US stocks and bonds as of June 30, 2004, up from $84.5 billion a year earlier. Once the figures for the end June 2005, are made available, the contribution of the Middle East in US stocks and bonds is definite to go up, analysts point out.

Today the oil producers are earning more than they ever have. In 2005, according to the IMF data, oil exporting nations are expected to earn $383 billion from overseas sales of oil and gas. This is nearly double the inflation-adjusted value of the previous peak — $197 billion in 1980.

It is believed that generally a $10 a barrel rise in oil prices contribute to shedding 0.5 per cent of the global economic growth. However, the oil’s rise has so far had less impact than was initially expected and there are several reasons for that. Major western economies are now significantly less dependent on imported oil than they were in 70s, hence less exposed to the whims of the oil markets. However, the surging investments in the US by the oil rich Middle East has turned out to be a significant factor in keeping the US interest rates low, similar to the effect from Chinese investment of its huge foreign exchange reserves. In April, the then Federal Reserve governor Ben Bernanke pointed to the surge in oil prices as one source of what he called a “global savings glut” that has been a key force in keeping rates low in the US.

When seen in the above perspective, all discussion about an impending ‘clash of civilizations’ seems improbable and simply unsustainable.