Petrodollars could amount to almost $1.3 trillion dollars in 2008, based on a year-to-date average oil price of $112 per barrel, says Calyon Securities CLSA's head of China energy research, Gordon Kwan. A petrodollar is defined as a dollar's worth of foreign exchange obtained by a petroleum-exporting country through sales abroad. Petrodollars play an important role in greasing global markets, and have surged nearly tenfold, from $125 billion in 1998, as average oil prices increased from less than $13 per barrel to over $110. In 2001, 27% of annual petrodollars were invested in U.S. equities and 16% went into U.S. bonds. During 2007, those numbers increased to 30% and 28%, respectively, says Kwan. The higher percentage of petrodollar going into U.S. financial assets have contributed to the long bull market in recent years, limited the rise in U.S. interest rates and recapitalized major banks. This could be a direct result of the oil exporting countries' strategy to diversify their exposure away from their mostly oil-based economies. While down significantly from recent highs, the overall U.S. stock market and global economies have so far fared much better than in the previous two oil price shocks (down over 30%). Perhaps this is explained by the fact that oil expenditures are a much smaller part of global GDP than before. For example, in the early 1980s, global oil expenditures amounted to over 6% of global GDP. But in 2007, it fell to 4%, although it could rise to over 6% again this year if oil prices continue to hover at current levels. So maybe high oil prices might not be so evil after all?