$3 a gallon for gas, $70 a barrel for oil, how big a windfall for the world’s big oil exporters?

At least one station in the South is asking almost $6 a gallon for gasoline.   That is about what it costs in - shock of all shocks -- Europe.

$6 a gallon may be a bit excessive, but there is little doubt of Katrina's impact on the infrastructure that (in good times) seamlessly supplies US drivers with the fuel they need.  Gas prices of more than $3 a gallon are now the norm, and Americans, unlike Europeans, are not used to paying those kinds of prices.

But it is still worth thinking - in very broad terms - about the impact $70 a barrel oil (if sustained) would have on the global flow of funds.  To state the (extremely) obvious, oil importers are much worse off with oil at $70 than with oil at $30 a barrel, while oil exporters are much better off.

Some ball park math is illustrative.

An increase in the cost of oil from $30 a barrel to $70 a barrel increases the US trade deficit by roughly $200 billion.  A simple rule of thumb is that a $1 a barrel increase in the price of crude increases the US oil import bill by $5 billion during the course of a year.

The impact on US exports is minimal.  The US exports more to oil exporters, but less to other oil importers.  Look at the trade data for this year -- exports to OPEC counties are way up, exports to the oil-importing economies of Asia are basically flat.

OPEC and Russia, by contrast, get about $600 billion more a year with oil at $70 than with oil at $30.  Russia and Saudi Arabia produce about 10 mbd; each roughly gets an extra $150 billion.  The other OPEC countries produce about 20 mdb, and split an extra $300 b.

Suppose that OPEC and Russia can afford their current level of imports so long as oil is at $30 a barrel.  Under those conditions, the entire $600 b windfall is left to slosh around the global financial system.

Add in China's roughly $300 b annual reserve increase and you have more than enough to finance the US current account deficit - so long as all the oil exporters windfall and China's reserve increase all gets put in US dollar assets of various kinds.

(Technically, this only works if the OPEC countries are not investing their windfall in China ... any of the OPEC surplus that finances, directly or indirectly, some of the roughly $150 b in capital flowing into China this year would needed to be netted out of the sum available to finance the current account deficit of other oil importing countries)