In this study the contribution of petroleum revenues, as a source of capital formation, for the economic development of the exporting countries is considered. Initally, the question of significance of capital as a necessary factor for economic development is investigated. The overall rate of development is greatly affected and limited by shortage of productive factors, and among the scarce factors associated with underdevelopment capital is a very important one. However, the effectiveness of capital itself is limited by the absorptive capacity of the given economy. The availability of noncapital factors and their relative elasticities not only determine the rate of development but generally in the short run set a limit to the amount of capital which can efficiently be invested. For the purpose of this study the assumption is that absorptive capacity in some of the petroleum exporting countries is not the limiting factor to economic development.