In the past half-century, sharp increases in oil prices have been harbingers of most of America’s economic recessions. Today is no exception: The quadrupling of oil prices in just six years is a leading cause of America’s current economic predicament. But in addition to the traditional dislocations associated with high oil prices, the current spike is also driving a structural shift in the world economic balance of power. Trillions of dollars are migrating from industrialized and developing nations to the coffers of a small group of oil-producing nations, most of them authoritarian and many of them unfriendly to the West. And unlike previous price spikes, this one is likely to last a long time, so it is high time that we think about the longer-term implications, and what to do about them.

For developing countries, many of which still carry debts from the oil shocks of the 1970s, $100-plus oil is in effect a regressive tax that slows economic growth and exacerbates existing social tensions. It also makes them economically and politically dependent on some of the world’s nastiest petro-regimes. For the United States, with its net foreign debt in excess of $3 trillion and with oil spending at $1 billion per day, the current wealth transfer heralds geopolitical decline and eventual erosion of sovereignty in the form of lost control over major economic assets.

With annual oil revenues in excess of $1 trillion, the 13 members of the Organization of Petroleum Exporting Countries (OPEC) already wield tremendous economic power. As recent multibillion-dollar bailouts of major financial institutions like Citigroup and Merrill Lynch show, these countries are not just laughing all the way to the bank; they now own the bank (or at least part of it, anyway). The bailout of America’s prime symbols of economic prowess signals not only the vulnerability of the U.S. economy but also the ascent of sovereign wealth funds as new power brokers in international relations. These government-owned investment funds, whose combined assets currently surpass $3.5 trillion, are pouring billions into hedge funds, private equity funds, real estate, natural resources, media conglomerates and other nodes of the West’s economy. Distressed financial institutions facing liquidity problems often find cash injections offered by sovereign wealth funds the only way to stay afloat.

The fast-growing Dubai skyline: Guess who’s paying for it?

Some experts dismiss the concern about foreign acquisitions of Western assets as a new form of jingoism. They deride the “fear mongers” as disciples of those who stoked the anti-Japanese hysteria of the 1980s. Sovereign wealth funds, they believe, are a boon to...