![]() ![]() ![]() Think of prosperous workers finishing their work day at 4pm, and heading to the fjords for some outdoor activities. Think of futuristic electric vehicles silently cruising on the roads, and the electricity grid almost entirely powered by clean renewable energy. Think of the most efficient and thoughtfully created institutions and infrastructure around the world, and put them all in one place. Further, windfall revenues from oil seem to promote rent-seeking behaviour and investment into unproductive activities.Ī far cry from oil exporting countries that have fallen to this “oil curse" is Norway. ![]() The sudden rolling back of subsidies and welfare programmes can lead to political backlash, and maintaining high quantum of spending by borrowing can lead to debt-traps. Periods of high oil prices often lead to increasing government spending that cannot easily be undone in years of low prices. The second type of detrimental impact has been triggered by the increasing reliance of government spending on oil prices. This phenomenon is called the Dutch disease, after what happened to the Netherlands in the 1960s, when its economy become excessively reliant on natural gas exports. Consequently, non-oil exports become uncompetitive, and cheap imports flooded the economy, thereby leading to a decline in the domestic non-oil industry. Firstly, as oil became a significant share of an economy’s exports, it overvalued domestic currency, therefore making its exports more expensive. There are at least two ways in which this has happened in “petro states" such as Venezuela, Saudi Arabia, Nigeria, Algeria and Iran. ![]() While much of Venezuela’s modern history has been characterized by political upheavals that were not triggered by oil, this industry has contributed to economic disruptions within the country and amplified the negative impacts of poor policy planning. ![]()
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