As oil prices continue to set new records, investors outside Europe and the United States are increasingly shaping trends in financial markets. Petrodollar investors have a newfound influence, and the more than tripling of oil prices since 2002 makes them the largest and fastest-growing component of a broad shift in global economic markets—a shift that also includes Asian central banks, private-equity firms, and hedge funds.¹ High oil prices are, in effect, a tax on consumers, generating windfall revenues for oil-exporting nations, which in 2006 became the world’s largest source of net global capital flows, surpassing Asia for the first time since the 1970s (Exhibit 1). A majority of these revenues have been recycled into global financial markets, making petrodollar investors increasingly powerful players.

Moreover, the influence of petrodollar investors is likely to continue to grow over at least the next five years. The exact size of future petrodollar foreign investments will depend on oil prices, which are subject to considerable uncertainty. Nonetheless, we can estimate the general direction of petrodollar assets using three benchmark price points and research on global energy demand by the McKinsey Global Institute (MGI).