While small Gulf states with market-driven economies - such as Qatar and the United Arab Emirates - are heading for overall growth, Saudi Arabia, the region's biggest economy, will use its extra cash to pay off domestic debt and build up foreign assets.
"The Saudi government is using its oil windfall to restore fiscal health rather than driving a broad economic boom through government spending," said Brad Bourland, chief economist at Saudi American Bank (SAMBA).
The 1970s oil boom fuelled massive spending on infrastructure and reconstruction throughout the energy-rich Gulf.
But this year's petrodollar windfall is unlikely to accelerate the pace of badly needed structural reform which remains sluggish, especially in key U.S. allies Saudi Arabia and Kuwait.
"Things looks very good when it comes to public finances, but I'm not optimistic on the economic front," said Kuwaiti economist Jassem al-Saadoun. "Will there be more job creation, privatisation and rebalancing of the economy? I doubt it."
Unemployment rates average 15 percent in the Arab world. And in the Gulf, most private sector jobs are taken by foreigners who make up over 30 percent of the region's 30 million population, economists say.
Job creation is proving a major challenge to top world oil exporter Saudi Arabia, where a bloated public sector can no longer absorb its teeming population.
"By paying off debt and building foreign assets Riyadh will build up a financial cushion," said a senior Western banker. "But it won't combat unemployment and train an unskilled workforce."
In real terms, stripping out the impact of inflation, oil prices - now at more than $40 a barrel - are near levels hit during the Arab oil embargo in 1973-4, but much lower than record highs after the 1979 Iranian revolution.
But in terms of Gulf finances, the prices still look spectacular.
"Saudi Arabia needs a $22-$25 oil price to do all right," said a Western oil executive. "With oil at $40-$50, it will be a phenomenal year."
The world's biggest oil exporter, pumping over 9.3 million barrels per day, is set to net record oil revenue of about $100 billion, up from last year's $86 billion - the highest in two decades. As a whole, Gulf producers are expected to net more than $180 billion from oil exports, up $35 billion from 2003.
Analysts say high oil prices have been a blessing for most of the Gulf Cooperation Council - Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman - relieving the pressure for reform, last sparked during the 1997-8 price crash which ended their golden days then.
Some of the rulers in the region, which straddles nearly half the world's oil reserves, have more prudent plans in mind for oil revenues that are on target to produce a budget surplus of $60 billion.
The economies of the six GCC states which grew at 6.8 percent in 2003, are forecast to grow in excess of 7 percent, according to Standard Chartered.
"Unlike spending patterns in the previous oil booms, the region's budgets underscore a new level of fiscal prudence," said Dubai-based Standard Chartered economist Daniel Hanna.
Privatisation programmes have met with some success, attracting international players led by European heavyweight banks to virgin markets in Saudi Arabia and Kuwait.
Economists say these countries still need to overhaul their crude-dependent economies by offloading state stakes in firms to boost the private sector, diversifying sources of income, slashing subsidies, cutting red tape and instituting legal reform to lure foreign investment.
Riyadh is making an effort to open its sector by issuing bank licences to international players like Deutsche Bank, while HSBC is starting a majority owned investment banking venture.
Earlier this month, Kuwait gave out its first foreign banking licence to France's BNP Paribas.
Bumper government spending has also fuelled a boom in the local stock market.
"Having reported 61.4 percent profitability growth for the whole market in 2003, the Saudi corporate sector appears to be heading towards another year of record profitability growth," economists at the country's biggest bank, National Commercial Bank, said in a half-term review.
The Saudi stock market, the Arab world's biggest bourse, has notched up gains of more than 42 percent this year after powering ahead 76 percent in 2003.
For smaller countries like Qatar and the UAE which matched their black gold with tourism, finance, banking and real estate projects, the economic prospects are bright.