Petrostate

Last updated

A petrostate or oil state is a country whose economy is heavily dependent on the extraction and export of oil or natural gas. The presence alone of large oil and gas industries does not define a petrostate: major oil producers that also have diversified economies are not classified as petrostates due to their ability to generate income from various industries and sectors beyond the oil industry. [1] Petrostates also have highly concentrated political and economic power, resting in the hands of an elite, as well as unaccountable political institutions which are susceptible to corruption. [2]

Contents

Countries considered to be petrostates

Various countries have been identified as current or former petrostates:

Economy

Petrostates rely on oil as a primary source of income, which can make their economies vulnerable to fluctuations in oil prices. When oil prices are high, they tend to thrive, but they can struggle during periods of low oil prices.

Petrostates are typified by weak economies, where products are more frequently imported than domestically produced. Diversification can successfully occur in limited circumstances, such as Mexico becoming part of the North American Free Trade Agreement, or Dubai leveraging its location to become a hub of commerce and tourism. Most petrostates do not attempt economic diversification, instead seeking economic domination through large, state-owned oil companies. [1]

Governance

In some petrostates, leaders and governments may become more authoritarian as they accumulate significant wealth and power through the control of the oil sector. They may use these resources to maintain political control, suppress opposition, and stifle democratic institutions. For example, Steven Fish identifies oil wealth as one of the major reasons for Russia's failed democratization. He explains that revenue from oil exports fueled corruption, and corruption, in turn, hampered Russia's political liberalization. Furthermore, he notes that Britain's and Norway's resource wealth did not lead to authoritarianism because "sturdy democratic regimes" were already in place. [8] Similarly, Michael Ross argues that “the case of Russia since 1998 illustrates how oil revenues can endanger a weak democracy by boosting the popularity of an elected incumbent, who gradually removes checks and balances on their own authority”. [9]

Petrostates run by autocrats are also called petro-dictatorships. [10]

At the same time, in many petrostates, the government invest in social welfare programs, including healthcare, education, and subsidies for essential goods. For example, Kuwait, Saudi Arabia, United Arab Emirates, and Qatar have invested in education, healthcare, and public amenities to improve the quality of life for their citizens. [11] [12]

Social impacts

The reliance on oil and natural gas may preclude the development of other industries, known as Dutch disease. Light industries, including textiles and clothing, are key factors that drive women to participate in the workforce. Petrostates thus often have lower rates of female workers, which can impede women's access to social and political freedoms. [10]

Resource curse

Global energy prices can cause turbulent and unpredictable swings in a petrostate's economy. Undiversified reliance on oil and gas industries can cause political and economic crises when the price of oil drops. Over-investment in these industries at the expense of other sectors, such as manufacturing and agriculture, can hurt economic growth and competitiveness. Petrostates can suffer from the resource curse, meaning that their abundance of natural resources can have detrimental impacts on other parts of the economy, as well as negative social and political impacts. [2] [13]

Environmental and climate concerns

The extraction and production of oil can have significant environmental and ecological impacts, including pollution, habitat destruction, and greenhouse gas emissions. This can lead to environmental concerns and criticism, both domestically and internationally.

Recent studies challenge the assumption that the transition to sustainable energy will lead to the decline of petrostates, suggesting that their future depends on production costs and social factors. [14] [15] Furthermore, the low-carbon transition might provide new export opportunities for petrostates as energy-intensive sectors in developed countries decrease, potentially leading some to further specialize in high-carbon segments, particularly in the Middle East. [14]

Cultural narratives

The presence of a booming oil industry influences a nation's cultural landscape. It may manifest in conspicuous consumption, urban development, and the emergence of specific cultural symbols associated with wealth and status.

The petrostate narrative often becomes intertwined with the national identity. [16] [17] [18] [19] [20] The story of an oil-rich nation can influence collective memory and national pride. Cultural narratives might emphasize self-reliance, economic strength, or the role of oil in nation-building.

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Qatar</span>

The Economy of Qatar is one of the highest in the world based on GDP per capita, ranking generally among the top ten richest countries on world rankings for 2015 and 2016 data compiled by the World Bank, the United Nations, and the International Monetary Fund (IMF). The country's economy has grown despite sanctions by its neighbors, Saudi Arabia and the United Arab Emirates. Mainly because the country exports primarily to Japan, South Korea, India and China, making the sanctions effectively redundant as neither Saudi Arabia nor the United Arab Emirates have imposed trading penalties such as tariffs or embargoes on either of these countries for trading with Qatar, or offering incentives such as discounts for their own energy exports to reduce Qatari exports.

<span class="mw-page-title-main">Economy of Saudi Arabia</span>

The economy of Saudi Arabia is the largest in the Middle East and the eighteenth-largest in the world. The Saudi economy is highly reliant on its petroleum sector. Oil accounts on average in recent years for approximately 40% of Saudi GDP and 75% of fiscal revenue, with substantial fluctuations depending on oil prices each year.

<span class="mw-page-title-main">OPEC</span> Intergovernmental oil organization

The Organization of the Petroleum Exporting Countries is an organization enabling the co-operation of leading oil-producing countries in order to collectively influence the global oil market and maximize profit. It was founded on 14 September 1960 in Baghdad by the first five members. The 12 member countries account for an estimated 30 percent of global oil production.

In economics, Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector and a decline in other sectors.

<span class="mw-page-title-main">Petroleum politics</span>

Petroleum politics have been an increasingly important aspect of diplomacy since the rise of the petroleum industry in the Middle East in the early 20th century. As competition continues for a vital resource, the strategic calculations of major and minor countries alike place prominent emphasis on the pumping, refining, transport, sale and use of petroleum products.

In current political-science and international-relations theory, a rentier state is a state which derives all or a substantial portion of its national revenues from the rent paid by foreign individuals, concerns or governments.

The resource curse, also known as the paradox of plenty or the poverty paradox, is the phenomenon of countries with an abundance of natural resources having less economic growth, less democracy, or worse development outcomes than countries with fewer natural resources. There are many theories and much academic debate about the reasons for and exceptions to the adverse outcomes. Most experts believe the resource curse is not universal or inevitable but affects certain types of countries or regions under certain conditions.

<span class="mw-page-title-main">Economy of the Middle East</span>

The economy of the Middle East is very diverse, with national economies ranging from hydrocarbon-exporting rentiers to centralized socialist economies and free-market economies. The region is best known for oil production and export, which significantly impacts the entire region through the wealth it generates and through labor utilization. In recent years, many of the countries in the region have undertaken efforts to diversify their economies.

<span class="mw-page-title-main">Price of oil</span> Spot price of a barrel of benchmark crude oil

The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC Reference Basket, Tapis crude, Bonny Light, Urals oil, Isthmus, and Western Canadian Select (WCS). Oil prices are determined by global supply and demand, rather than any country's domestic production level.

An energy superpower is a country that supplies large amounts of energy resources to a significant number of other countries, and therefore has the potential to influence world markets for political or economic gains. Energy superpower status might be exercised, for example, by significantly influencing the price on global markets, or by withholding supplies. Most recently, the term "energy superpower" is increasingly used to characterize nations at the forefront of energy transition and the development of renewable energy resources.

<span class="mw-page-title-main">Energy policy of Russia</span> Overview of the energy policy of Russia

Russia's energy policy is presented in the government's Energy Strategy document, first approved in 2000, which sets out the government's policy to 2020. The Energy Strategy outlines several key priorities: increased energy efficiency, reducing the impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness. Russia's greenhouse gas emissions are large because of its energy policy. Russia is rich in natural energy resources and is one of the world's energy superpowers. Russia is the world's leading net energy exporter, and was a major supplier to the European Union until the Russian invasion of Ukraine. Russia has signed and ratified the Kyoto Protocol and Paris Agreement. Numerous scholars posit that Russia uses its energy exports as a foreign policy instrument towards other countries.

<span class="mw-page-title-main">Energy security</span> National security considerations of energy availability

Energy security is the association between national security and the availability of natural resources for energy consumption. Access to cheaper energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries has led to significant vulnerabilities. International energy relations have contributed to the globalization of the world leading to energy security and energy vulnerability at the same time.

Hydrocarbon economy is a term referencing the global hydrocarbon industry and its relationship to world markets. Energy used mostly comes from three hydrocarbons: petroleum, coal, and natural gas. Hydrocarbon economy is often used when talking about possible alternatives like the hydrogen economy.

Megacorpstate is a form of market structure that designs new strategies to systematize the cartel power in the world. This particular market framework consists of oligopolistic interdependent nations-states and multinational corporations, which have established alliance to own majority of the market power. The most prominent organizations within the structure are OPEC and the Seven Sisters that include Exxon, Mobil, Socal, Royal Dutch-Shell, BP, Texaco and Gulf. Regardless of its great influence, Megacorpstate does not have a major recognition in the world. The main reason for its unfamiliarity is its disinclination to characterize itself as a separate market structure.

<span class="mw-page-title-main">Energy in Saudi Arabia</span>

EnergyinSaudi Arabia involves petroleum and natural gas production, consumption, and exports, and electricity production. Saudi Arabia is the world's leading oil producer and exporter. Saudi Arabia's economy is petroleum-based; oil accounts for 90% of the country's exports and nearly 75% of government revenue. The oil industry produces about 45% of Saudi Arabia's gross domestic product, against 40% from the private sector. Saudi Arabia has per capita GDP of $20,700. The economy is still very dependent on oil despite diversification, in particular in the petrochemical sector.

<span class="mw-page-title-main">Energy in Qatar</span>

Energy in Qatar describes energy production, consumption, and policies of the State of Qatar. The International Monetary Fund ranked Qatar as having the fifth highest GDP per capita in 2016 with a 60,787 USD per capita nominal GDP over a population of 2.421 million inhabitants. In 2014, oil and natural gas production made up 51.1% of Qatar's nominal GDP. Thus, Qatar has a worldwide high ranking of per capita GDP due to its significance production and exports in both crude oil and natural gas in proportion to its relatively small population.

<span class="mw-page-title-main">2010s oil glut</span> Oversupply of oil in the 2010s

The 2010s oil glut was a significant surplus of crude oil that started in 2014–2015 and accelerated in 2016, with multiple causes. They include general oversupply as unconventional US and Canadian tight oil production reached critical volumes, geopolitical rivalries among oil-producing nations, falling demand across commodities markets due to the deceleration of the Chinese economy, and possible restraint of long-term demand as environmental policy promotes fuel efficiency and steers an increasing share of energy consumption away from fossil fuels.

<span class="mw-page-title-main">Environmental issues in the United Arab Emirates</span>

Environmental issues in the United Arab Emirates (UAE) are caused by the exploitation of natural resources, rapid population growth, and high energy demand. The continuing temperature rise caused by global warming contributes to UAE's water scarcity, drought, rising sea level, and aridity. The countryside of the UAE, characterized with its great arid land, infrequent precipitation, and high temperatures are already facing long-term aridity. This precondition is very vulnerable to the effects of climate change and contributes to worsening water scarcity, quality, and water contamination.

A global energy crisis began in the aftermath of the COVID-19 pandemic in 2021, with much of the globe facing shortages and increased prices in oil, gas and electricity markets. The crisis was caused by a variety of economic factors, including the rapid post-pandemic economic rebound that outpaced energy supply, and escalated into a widespread global energy crisis following the Russian invasion of Ukraine. The price of natural gas reached record highs, and as a result, so did electricity in some markets. Oil prices hit their highest level since 2008.

References

  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Ashford, Emma (7 October 2015). "Petrostates in a Changing World" . Retrieved 22 June 2020.
  2. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Cara Labrador, Rocio (24 January 2019). "Venezuela: The Rise and Fall of a Petrostate". Council on Foreign Relations. Retrieved 22 June 2020.
  3. ↑ Hammond, John L. (2011). "The Resource Curse and Oil Revenues in Angola and Venezuela". Science & Society. 75 (3): 348–378. doi:10.1521/siso.2011.75.3.348. JSTOR   41290174.
  4. ↑ "Why Baku is backing away from oil dependence". 11 August 2021.
  5. ↑ Donath, Klaus-Helge (18 May 2012). "Politische Lage in Aserbaidschan: Petrokratie in Familienbesitz". Die Tageszeitung: Taz.
  6. ↑ Darwish, Tamer K.; Mohamed, Abdul Fattaah; Wood, Geoffrey; Singh, Satwinder; Fleming, Jocelyne (2017). "Can HRM alleviate the negative effects of the resource curse on firms? Evidence from Brunei" (PDF). Personnel Review. 46 (8): 1931–1947. doi:10.1108/PR-04-2016-0081. hdl: 10072/402179 . S2CID   157431894.
  7. ↑ Bindman, Polly; Ferris, Nick (April 4, 2023). "Inside Norway's efforts to move on from oil and gas". Energy Monitor.
  8. ↑ Fish, M. Steven (2005-08-29). Democracy Derailed in Russia: The Failure of Open Politics. Cambridge University Press. ISBN   978-1-139-44685-3.
  9. ↑ Ross, Michael Lewin (2013). The oil curse: how petroleum wealth shapes the development of nations (1. paperback printing ed.). Princeton, NJ: Princeton Univ. Press. ISBN   978-0-691-15963-8.
  10. 1 2 Treisman, Daniel (2020). "Economic Development and Democracy: Predispositions and Triggers". Annual Review of Political Science. 23: 241–257. doi: 10.1146/annurev-polisci-050718-043546 .
  11. ↑ Khoja, Tawfiq; Rawaf, Salman; Qidwai, Waris; Rawaf, David; Nanji, Kashmira; Hamad, Aisha (2017-08-21). "Health Care in Gulf Cooperation Council Countries: A Review of Challenges and Opportunities". Cureus. 9 (8): e1586. doi: 10.7759/cureus.1586 . ISSN   2168-8184. PMC   5650259 . PMID   29062618.
  12. ↑ De Jong, Martin; Hoppe, Thomas; Noori, Negar (2019-04-30). "City Branding, Sustainable Urban Development and the Rentier State. How Do Qatar, Abu Dhabi and Dubai Present Themselves in the Age of Post Oil and Global Warming?". Energies. 12 (9): 1657. doi: 10.3390/en12091657 . ISSN   1996-1073.
  13. ↑ Gaddy, Clifford G.; Ickes., Barry W. (2005). "Resource rents and the Russian economy". Eurasian Geography and Economics. 46 (8): 559–583. doi:10.2747/1538-7216.46.8.559. S2CID   153812247.
  14. 1 2 Goldthau, Andreas; Westphal, Kirsten (2019). "Why the Global Energy Transition Does Not Mean the End of the Petrostate". Global Policy. 10 (2): 279–283. doi:10.1111/1758-5899.12649. ISSN   1758-5880. S2CID   158105333.
  15. ↑ Bradshaw, Michael; Van de Graaf, Thijs; Connolly, Richard (2019). "Preparing for the new oil order? Saudi Arabia and Russia". Energy Strategy Reviews. 26: 100374. doi: 10.1016/j.esr.2019.100374 . hdl: 1854/LU-8623818 .
  16. ↑ Rutland, Peter (2015-01-02). "Petronation? Oil, gas, and national identity in Russia" . Post-Soviet Affairs. 31 (1): 66–89. doi:10.1080/1060586X.2014.952537. ISSN   1060-586X.
  17. ↑ Kuteleva, Anna (2020-01-02). "Discursive Politics of Energy in EU–Russia Relations: Russia as an "Energy Superpower" and a "Raw-Material Appendage"". Problems of Post-Communism. 67 (1): 78–92. doi:10.1080/10758216.2018.1520601. ISSN   1075-8216. S2CID   158115925.
  18. ↑ Maugeri, Leonardo (2006). The age of oil: the mythology, history, and future of the world's most controversial resource (1. publ ed.). Westport, Conn.: Praeger. ISBN   978-0-275-99008-4.
  19. ↑ Hertog, Steffen (2011-04-27). Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia. Cornell University Press. ISBN   978-0-8014-5753-1.
  20. ↑ Vitalis, Robert (2009-03-02). America's Kingdom: Mythmaking on the Saudi Oil Frontier. Verso Books. ISBN   978-1-84467-313-1.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.