Just where is the Middle East business cycle?

That the Middle East is in the grip of an oil boom is not in any doubt. Oil revenues of $180 billion last year were three times higher than in 1998, although admittedly 1998 was a poor year.

Liquidity is flowing into the region. Plus since September 11 there has been an exodus of funds from the US. Dubai Holding officials put this figure at around $300 billion.

Thus high oil revenues and massive inward investment have combined to produce a once-in-a-generation opportunity.

So far Dubai and Qatar have led the way in attracting this capital: Dubai to develop its tourism, real estate and service sectors through huge government-initiated projects; Qatar to develop its LNG reserves.

But others are following. The $10 billion Blue City outside Muscat has just been unveiled. Plus Qatar, Bahrain and Kuwait have all announced land-reclamation projects that bare superficial resemblance in concept at least to Dubai's Palm Jumierah Island which should be opened later next year.

However, with more than $100 billion worth of projects either under construction or committed, Dubai is undoubtedly the market leader. Indeed, some local market commentators have begun to wonder if there is not too much happening in Dubai too fast, and whether a reassessment of some of the bigger projects is not called for.

This would hardly be a sign of failure. Perhaps Dubai has almost been too successful in attracting the excess liquidity of the Middle East. A re-examination of projects and a concentration on making the most important a big success would appear good business logic.

For Dubai now enters the delivery phase for its first mega projects, such as The Palm, Jumeirah, and the 45-tower Jumeirah Beach Residence. This is bound to be a testing period, but the macro-economic backdrop is still extremely favorable.

Last week oil prices closed back above $55 a barrel, unprecedented for this time of year. The truth is that oil supplies are looking stretched worldwide.

The 50% expansion of Russian oil exports since 2000 has ground to a halt this year: the UK will shortly become a net importer due to the exhaustion of North Sea oil: and some geologists are calling into question the sustainability of Saudi Arabian oil flows, or at least those with low production costs.

Meanwhile, the economic slowdown in the industrialized world due to higher oil prices has been slower coming than many predicted. Therefore the demand for oil continues to grow apace. Supplies under pressure; demand on the way up: this is a very good signal for higher oil prices.

Commentators like Jim Rogers, a former partner of George Soros, believe oil price rises will not stop at $55 or $100 or even $150 a barrel. This would give the world its third great oil shock.

There are, of course, signs of weakening in the industrialized economies. US jobs data last week showed half the expected creation of new jobs; major European economies are clearly in trouble; consumer spending is slowing down. But a serious downturn, or recession, is just not yet evident.

It is difficult therefore not to avoid the conclusion that the good times will continue to roll in the Middle East unless or until the industrialized countries run into trouble. Even then the precedent of the 1970s suggests that commodity prices can stay high even when their customers are in difficulty.