You are thinking in the right direction ...
I agree with some of what you say, though not all.
Yes, economic power by itself is only a means to achieve the other two powers that matter more: military and cultural domination. China is well on its way to achieve the first, but faces a significant hurdle in the second because English is entrenched as the lingua franca.
The Arab world has squandered its oil wealth but that was no accident: when the Europeans carved out the Middle East, they made sure to install the most inept yet brutal warlords as their proxy guardians of the oil. Straight from the camel to the limousine, these guys had neither the training nor the vision to use their wealth wisely. The classic case of
nouveau riche. Imagine where the Arab world would be if they had been ruled by conscientious and educated leaders like the Scandinavian countries.
Also note that the situation is very different in other oil rich Muslim countries like Malaysia -- they have managed their wealth much better. Perhaps it's because of a large Chinese population; the Chinese have some very good cultural traits, including planning for the future.
I also agree with your observation that the Western world is saving their oil for a rainy day, while letting the Arabs use up theirs first.
Regarding Islam's conquests, I don't think what happened was all that unusual. Invading religions rarely take over the conquered culture, quite the reverse. Look at South America -- the Chrisitanity practised there has a local flavor, quite distinct from the European variety. The same is true for Islam -- it is always a mix of religion and indigenous culture.
Finally, you are somewhat right about the reasons fundamentalism found a foothold in the Islamic world. As the dominant Christian world dictates the rules and double standards, the Islamic countries are powerless to resist. When faced with injustice against Muslims, the fight is taken up by ragtag individuals since the established Muslim governments are quiet, either through impotence or acquiescence. It is this dynamic that fuels Islamic fundamentalism. I believe that so-called Islamic terrorism will vanish as soon as the Muslim world develops a fist strong enough to dissuade the West or the Other. That's because the established narrative is that it is acceptable for organized armies to kill thousands of civilians (and come up with a plausible propaganda), but when anyone else kills civilians it is terrorism. So, terrorism and fundamentalism will disappear only when there is a balance of power and each side has to behave.
I am including the concept of 'fist' to include media power as well as military since the latter is much less useful without the former, to control public opinion at home and abroad.
