ABSTRACT
This chapter discusses the problem of the investment of oil funds from the perspective of Organization of Oil-Exporting Countries (OPEC) self-interest. It utilizes "OPEC surplus countries" and "Arab Gulf states" interchangeably. In the prevailing circumstances, given any realistic level of production, some OPEC countries will realize balance of payments surpluses. If OPEC countries were isolated politically from the developing countries, they would be extremely vulnerable in a world composed predominantly of oil-importing countries. OPEC countries gain enormous economic benefits by investing their surplus funds in Organization for Economic Cooperation and Development countries as opportunities there for investment are greater credit-worthiness is much higher and more secure, and markets are highly organized. The increase of financial assets held by OPEC countries means a corresponding increase in the financial liabilities of deficit countries. Data on worldwide real investment rates, general prices, financial asset flows and OPEC surpluses provide ample evidence that the world response to OPEC savings best fits the placement case.
