The Oil Curse

The Oil Curse

This idea of an ‘oil curse’ is seen in North and West Africa as well as in the Middle East. I have read about it in both courses and have seen very similar outcomes. First off, the discovery of oil actually happened quite recently in most of those countries (1950’s to 1970’s). So, there has not been enough time for these countries to react and develop accordingly. Being a resource/commodity economy means the market and thus your domestic economy is volatile. Because of this volatility many countries tend to nationalize their oil production, which means putting under control of the country and its leaders. This act inherently breeds corruption because countries have massive oil revenues and few or no checks and balances and the money’s distribution.

Michael Watts insists that the massive violence and corruption in oil states is not due to the commodity itself, but the centralization of the resource revenue. Furthermore Watts thinks the nationalization of a resource breeds the violence and conflict. To this, I agree to an extent, but maintain that without the resource countries would not have the type of violence they do. For example, violence would not be centered around the Niger Delta if there was no oil being produced there. The Niger Delta is sedimentary basin surrounded by few other available resources, yet migration has flocked there.

To think the nationalization of oil has led to the violence and conflict is a new point of view. From most articles I have read, the nationalization is always seen as an aspect of the overarching issues of an oil economy, not its own mechanism. However, Watts makes great points when discussing how Niger states are struggling to maintain their power because of the conflict arising from oil. Nigeria today has the largest economy in Africa, in large thanks to oil and the conflicts in the Middle East. It is important to remember that the United States and other nations came to Africa for oil because of the instability they saw in the Middle East and Venezuela. Therefore, Nigeria needs to maintain its stability if it wants to continue to capitalize on oil production.

While oil prices have plummeted, Nigeria has slumped into a recession. Similar to other oil curse nations, Nigeria relies on oil for 70% of its government revenue. Because of its lack of diversification, Nigeria cannot advance when oil prices and revenues are low. In MENA states, the decrease of oil prices usually means the decrease of government spending/welfare and distribution. Yet, the kings and royalty maintain their lavish lifestyles with the amount of oil revenue that came in. Many countries that have nationalized oil companies do not release public financial statements, so nobody knows what they are truly making or doing with their profits. The real push should be for diversification of the economy by putting oil revenue into infrastructure development. Meanwhile, citizens should be pushing for more transparency so the government can be held accountable for oil production and subsequent redistribution.

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