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Could Fossil Fuel Abundance Have Negative Political Consequences?

- May 6, 2013

Charles Mann has an interesting article in the Atlantic about the potential deleterious consequences of finding large quantities of natural gas (methane hydrate) underneath the seafloor.  We may believe that fossil fuel scarcity is a major source for political instability. Yet, it is not at all clear that finding large new quantities of fossil fuels will make the world a safer place. Mann discusses some research with this implication, including this paper I wrote with Michael Ross.

Shortfalls in oil revenues thus kick away the sole, unsteady support of the state—a cataclysmic event, especially if it happens suddenly. “Think of Saudi Arabia,” says Daron Acemoglu, the MIT economist and a co-author of Why Nations Fail.“How will the royal family contain both the mullahs and the unemployed youth without a slush fund?” And there is nowhere else to turn, because oil has withered all other industry, Dutch-disease-style. Similar questions could be asked of other petro-states in Africa, the Arab world, and central Asia. A methane-hydrate boom could lead to a southwest-to-northeast arc of instability stretching from Venezuela to Nigeria to Saudi Arabia to Kazakhstan to Siberia. It seems fair to say that if autocrats in these places were toppled, most Americans would not mourn. But it seems equally fair to say that they would not necessarily be enthusiastic about their replacements.

Augmenting the instability would be methane hydrate itself, much of which is inconveniently located in areas of disputed sovereignty. “Whenever you find something under the water, you get into struggles over who it belongs to,” says Terry Karl, a Stanford political scientist and the author of the classic The Paradox of Plenty: Oil Booms and Petro-States. Think of the Falkland Islands in the South Atlantic, she says, over which Britain and Argentina went to war 30 years ago and over which they are threatening to fight again. “One of the real reasons that they are such an issue is the belief that either oil or natural gas is offshore.” Methane-hydrate deposits run like crystalline bands through maritime flash points: the Arctic, and waters off West Africa and Southeast Asia.

In a working paper, Michael Ross and a colleague, Erik Voeten of Georgetown University, argue that the regular global flow of petroleum, the biggest commodity in world trade, is also a powerful stabilizing force. Nations dislike depending on international oil, but they play nice and obey the rules because they don’t want to be cut off. By contrast, countries with plenty of energy reserves feel free to throw their weight around. They are “less likely than other states to sign major treaties or join intergovernmental organizations; and they often defy global norms—on human rights, the expropriation of foreign companies, and the financing of foreign terrorism or rebellions.” The implication is sobering: an energy-independent planet would be a world of fractious, autonomous actors, none beholden to the others, with even less cooperation than exists today.

The fact that China and the U.S. both currently rely on oil imports may be an important stabilizing force as it creates a shared interest in stable global oil markets and thus in ensuring that the Oceans are navigable, the Middle East is relatively stable, and that rules and norms whose violations could trigger instability are obeyed. Energy independence has long been thought to free U.S. foreign policy from undesirable constraints. But would the world be more stable if the U.S. had fewer constraints on how it exercises its foreign policy? At the very least, this is an important question to ask with the U.S. expected to produce more oil than it imports for the first time next year.