The Source of Power Behind Winning the Expo: 'Oil Money' [News Terminology]

The 'Petro Dollar' Holding Oil Payment Hegemony
Resource-Rich Countries Accumulate Dollar Reserves Through Exports
Future Uncertain... Saudi and Others Strive for Business Diversification

The source of Saudi Arabia's power, which successfully secured the hosting of the '2030 World Expo' by overwhelmingly defeating Busan, South Korea, and Rome, Italy, cannot be separated from 'oil money.' Oil money refers to the massive dollar foreign exchange reserves accumulated by exporting fossil fuels and is also synonymous with resource-rich Middle Eastern countries like Saudi Arabia.

'The Lifeblood of Human Civilization' Fossil Fuels... The Dollar Holding Payment Hegemony

Resource-rich countries accumulate foreign exchange reserves such as dollars through fossil fuel exports. For this reason, Saudi Arabia remains a key U.S. partner in the Middle East despite various controversies, including human rights abuses.
[Image source=Reuters Yonhap News]

Oil and natural gas are like the lifeblood of human civilization today. Almost all consumer goods we use daily contain petrochemical products, and our means of transportation and power generation facilities are also oil-based.

The currency used internationally to settle payments for such oil resources is called 'Petrocurrency.' Representative currencies include the US dollar, Eurozone euro, and British pound, among which the dollar's status is absolute.

According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the dollar accounts for 46% of all payments in the global oil market, nearly half. Therefore, oil money is synonymous with 'Petrodollar,' serving as a cornerstone that solidifies the power of the world's number one reserve currency, the dollar.

Resource-Rich Countries Sell Oil to Accumulate Dollar Reserves... The Source of 'Oil Money'

Global oil-producing cartel OPEC+ (Organization of the Petroleum Exporting Countries)
[Image source=AP Yonhap News]

Saudi Arabia, other OPEC+ (Organization of the Petroleum Exporting Countries) member countries, and other resource-rich nations earn dollars by exporting fossil fuels. The dollars generated accumulate in the country's foreign exchange reserves, forming today's oil money.

Oil money is used when resource-rich countries purchase specialized equipment for overseas oil drilling and exploration, as well as when making foreign investments. For example, Saudi Arabia reportedly spent over $7.8 billion (about 10 trillion won) just on this Expo bidding competition.

Of course, oil money is not a guaranteed blank check. Since it is foreign currency earned through resource exports, oil money is greatly affected by fluctuations in international oil prices. When global oil demand exceeds supply, prices soar, and oil money becomes abundant; in the opposite case, it suffers losses.

For this reason, five countries?Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela?formed OPEC in 1960. They created a cartel to control oil production and global supply to support oil prices.

Energy Transition Threatens the Future of Oil Money... Full Effort on 'Industrial Diversification'

The Public Investment Fund, created through the sale of shares in the state-owned Saudi Aramco, is being spent on various projects aimed at diversifying Saudi Arabia's industry and enhancing national competitiveness.
[Image source=Yonhap News]

Some believe that the so-called 'energy transition,' driven by the rise of renewable alternative energies such as solar and wind power, could threaten oil money.

Of course, even if the share of oil as an 'energy resource' decreases, oil money itself will remain robust as long as demand for petrochemical products holds up. However, in the long term, it is expected that it will no longer serve as a means of earning massive dollars as it does now.

Due to these uncertainties, Middle Eastern resource-rich countries dependent on fossil fuel exports are each attempting industrial diversification. In particular, Saudi Arabia, which has put great effort into hosting the Riyadh International Expo, sees this Expo as part of a national grand strategy called 'Vision 2030.'

The goal of Vision 2030 is to break away from extreme dependence on the resource economy. To this end, Saudi Arabia is developing various infrastructures domestically and fostering digital industries, entertainment, sports, and exhibition industries.

Oil money is also used to finance the achievement of these goals. After the initial public offering (IPO) of Saudi Aramco, the world's largest oil company owned by the Saudi government, proceeds from share sales have been used to establish a public investment fund, which is utilized for various investment projects. As of the second quarter of this year, the size of this fund reached $700 billion (about 901 trillion won).