Is oil windfall a curse for poor countries?

By Ed Stoddard

DALLAS (Reuters) - Red-hot oil prices are a blessing for big energy companies but often prove a curse for poor oil-producing countries.

Exxon Mobil and other energy giants traditionally use good times as an occasion to make prudent investments with their cash. But oil-rich countries that are poor -- and often poorly run -- tend to squander their windfall profits on dubious projects or have them stolen by corrupt officials.

So when the inevitable price bust occurs, developing countries are ill-prepared.

"The oil majors have many decades of experience in smoothing out their revenues and investing the money during the fat years to prepare for the lean years," said UCLA political scientist Michael Ross.

Exxon, which was holding its annual meeting on Wednesday, enjoyed full-year earnings last year of $40.61 billion (20.30 billion pounds).

State coffers in oil-producing countries like Angola are also overflowing but many lack the transparency of publicly listed Exxon. Many have neither the capacity to handle such an income surge nor the will to spend it in an equitable manner.

"New oil producers especially are largely unprepared for revenues of this scale ... oil-producing countries today are being hit with a tsunami of cash, and the danger is that they will squander it just like they squandered the surpluses of the 1970s," Ross, a noted expert in the field, told Reuters.

The new oil club includes African nations such as Equatorial Guinea, Chad and Sudan.