The Oil Curse

Governments find it bureaucratically easier and politically more popular to collect revenues from their oil sectors than to collect taxes from the population at large.

Oil supplies begin to grow tighter, as rising demand outpaced new discoveries. The major oil exporters of the developing world started to collude through the Organization of Petroleum Exporting Countries (OPEC). The United States also became increasingly dependent on foreign supplies, as its domestic production began to decline while consumption soared. In addition, the Bretton Woods system of fixed exchange rates—which had contributed to keeping prices stable—fell apart.

They also controlled the shipping and marketing of almost all the world’s petroleum, which enabled them to keep prices steady and capture most of the profits for themselves.

revenues it bestows on governments are unusually large, do not come from taxes, fluctuate unpredictably, and can be easily hidden.

volatility of world oil prices, and the rise and fall of a country’s reserves, can produce large fluctuations in a government’s finances

sheer volume of these revenues makes it easier for authoritarian governments to silence dissent.

ut the oil companies’ role has sharply diminished since the early 1970s, when most developing countries nationalized their oil industries.

They are also more secretive, more financially volatile, and provide women with fewer economic and political opportunities.

Today, the oil states are 50 percent more likely to be ruled by autocrats and more than twice as likely to have civil wars as the non-oil states.

upheaval in global energy markets in the 1970s appears to have triggered the resource curse, by producing a drastic increase in the volume and volatility of government revenues in the oil-producing states.