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Oil exporting countries may become biggest U.S. Government creditors

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Oil's four-year bull run to +$140 per barrel has increased the wealth of 'petrodollar' nations, and is about set to propel another shift, this time in the bond market.

Petroleum-exporting nations, such as Saudi Arabia and Russia are set to become the biggest creditor nations to the U.S. Government, Bloomberg News reported Monday.

Holdings of petrodollar nations increased 44% to $510 billion through April, Bloomberg News reported Monday -- an increase pace that's set to displace Japan, which holds the largest amount of U.S. Treasuries, at $592.2 billion.

Oil rose about 20 cents to $145.28 per barrel in late Monday afternoon trading.


Economist Peter Dawson said the U.S.'s large import oil bill and increasing debt obligation to petronations will have a variety of consequences for the United States, and he's still trying to identify a positive one.

Foreign oil bill: no silver lining

"It's hard to find a silver lining in this dark cloud of petrodollar data," Dawson said. "Up to $700 billion in oil and energy purchases is transferred overseas. That's an enormous outlay of dollars, about $400-450 billion of which could be kept at home here in the states with a better national energy policy."

"The new petrowealth obviously also increases the power of petronations, such as Russia. We're grateful that they're re-circulating some of that money back to us in the form of Treasury purchases, but if they ever shift their investment significantly, for whatever reason, interest rates in the U.S. would rise," Dawson said. "So one good goal for the next president should be to kick the U.S.'s foreign oil habit. It will boost our economy and enhance our nation's ability to act independently in international politics, if required to do so."

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Last updated: November 27, 2009: 05:16 AM

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